Which of the following are the examples of stock variables in an economy 1 Income 2 Foreign Debt 3 W...........

Indian Economic System(CSC) Growth and development

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Which of the following are the examples of stock variables in an economy?

1. Income

2. Foreign Debt

3. Wealth

4. Money Supply

5. Depreciation

Select the correct answer using the code given below:

1, 2 and 5 only

2, 3 and 4 only

1, 4 and 5 only

1, 3 and 4 only

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Explanation:

Option (b) is correct Supplementary notes: Stock and Flow Variables

A variable is a measurable quantity which varies (changes). The basis of distinction is measurability at a point of time or period of time.

A fl ow is a quantity which is measured with reference to a period of time. Thus, flows are de fi ned with reference to a specific period (length of time), e.g., hours, days, weeks, months or years. It has time dimension. National income is a fl ow. It describes and measures flow of goods and services which become available to a country during a year.

Similarly, all other economic variables which have time dimension, i.e., whose magnitude can be measured over a period of time are called fl ow variables. For instance, income of a person is a flow which is earned during a week or a month or any other period. Likewise, investment (i.e., addition to the stock of capital) is a fl ow as it pertains to a period of time

Other examples of flows are: expenditure, savings, depreciation, interest, exports, imports, change in inventories (not mere inventories), change in money supply, lending, borrowing, rent, profit, etc. because magnitude (size) of all these are measured over a period of time.

A stock is a quantity which is measurable at a particular point of time, e.g., 4 p.m., 1st January, Monday, 2010, etc. Capital is a stock variable. On a particular date, a country owns and commands stock of machines, buildings, accessories, raw materials, etc., it is stock of capital. Like a balance-sheet, a stock has a reference to a particular date on which it shows stock position. Clearly, a stock has no time dimension (length of time) as against a fl ow which has time dimension. A fl ow shows change during a period of time whereas a stock indicates the quantity of a variable at a point of time. Thus, wealth is a stock since it can be measured at a point of time, but income is a fl ow because it can be measured over a period of time. Examples of stocks are: wealth, foreign debts, loan, inventories (not change in inventories), opening stock, money supply (amount of money), population, etc.