Stock and Flow Variables

Macroeconomic variables are of two fundamentally different types — STOCK variables and FLOW variables — and telling them apart is essential, because they are measured in different ways and cannot be added together directly.

A STOCK variable is a quantity measured at a PARTICULAR POINT IN TIME. It has no time dimension of its own — it is simply the amount that exists at one instant, like a photograph taken at a single moment. Because a stock is measured 'as on' a given date, it makes no sense to attach a period to it. Examples of stock variables include: the quantity of money in circulation as on 31st March; the total capital (machines, buildings, equipment) an economy possesses on a given date; the population of a country on the census date; the amount of water in a tank at 6 o'clock; and the wealth of a household today.

A FLOW variable, by contrast, is a quantity measured OVER A PERIOD OF TIME. It always carries a time dimension — 'per hour', 'per month', 'per year' — because it measures the RATE at which something happens during an interval, like a video recorded over a stretch of time rather than a single snapshot. Examples of flow variables include: national income earned during a year; investment (the addition to capital) made during a year; the quantity of water flowing into the tank per minute; a person's monthly salary; and the volume of exports during a year.