(i) Read the following statements carefully : Statement 1 : Stock variables are measured at a point of time. S

Question 40 of 75

Q. (i) Read the following statements carefully : Statement 1 : Stock variables are measured at a point of time. Statement 2 : Flow variables and stock variables are same. In light of the given statements, choose the correct alternative from the following : (A) Statement 1 is true and Statement 2 is false. (B) Statement 1 is false and Statement 2 is true. (C) Both Statements 1 and 2 are true. (D) Both Statements 1 and 2 are false.

(OR)

(ii) Identify, flow variable from the following : (Choose the correct alternative) (A) Distance between Delhi and Amritsar (B) Annual expenditure of a school (C) Bank balance of Mr. Mukesh as on 31st March, 2022 (D) Investments of Mr. Mohit as on 31st December, 2021

West Bengal WbchseCBSE Class XII Board 2023MCQ· 1mImportance★★★★★

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Part (a)Concept understanding — Stock Versus Flow

Let’s start with something you already know: your pocket money.

Suppose your father gives you ₹500 every week. That ₹500 is a flow — it comes in over a period of time. Now suppose you save ₹200 each week for a month. At the end of the month, you have ₹800 in your wallet. That ₹800 is a stock — it is the amount you have at a particular point in time.

This is the whole idea in a nutshell. A stock is measured at a point in time. A flow is measured over a period of time.

The precise meaning

In economics, the distinction is crucial because it prevents confusion between what you have and what you get.

Note

Stock — a quantity measured at a specific moment. It has no time dimension.

Flow — a quantity measured per unit of time. It has a time dimension (per day, per month, per year).

Examples from your NCERT textbook:

Stock	Flow
Wealth	Income
Capital	Investment
Money supply (on a given date)	Money supply growth (per year)
Population (on 1 Jan)	Births (per year)
Water in a tank	Water flowing in per minute

Notice: a stock can change only because of flows. If you add water (inflow) and remove water (outflow), the stock changes. This gives us a simple identity:

\text{Stock at end} = \text{Stock at start} + \text{Inflow} - \text{Outflow}

In national income accounting, this becomes:

K_t = K_{t-1} + I_t - D_t

Where:

$K_t$ = capital stock at the end of year $t$ (a stock)
$K_{t-1}$ = capital stock at the start of year $t$ (a stock)
$I_t$ = gross investment during year $t$ (a flow)
$D_t$ = depreciation during year $t$ (a flow)

Why it matters

If you mix up stock and flow, you make serious errors. For example:

“India’s national income is ₹200 lakh crore” — that’s a flow (per year).
“India’s national wealth is ₹1,000 lakh crore” — that’s a stock (at a point).

You cannot compare them directly. A country with a high income (flow) might have low wealth (stock) if it spends everything. A rich country (high stock) might have low current income.

Another classic mistake: “Investment is part of capital.” No — investment is a flow that adds to the stock of capital. Capital is the accumulated result of past investments.

A diagram in words

Imagine a bathtub. The water level at 8:00 AM is a stock. The tap is open — water flows in at 5 litres per minute — that’s a flow. The drain is open — water flows out at 2 litres per minute — that’s another flow. The water level at 8:10 AM is a new stock, higher than before because inflow exceeded outflow.

In the economy: …

Part (b)Concept understanding — Stock Versus Flow

Let’s start with something you already know: your pocket money.

This is the whole idea in a nutshell. A stock is measured at a point in time. A flow is measured over a period of time.

The precise meaning

In economics, the distinction is crucial because it prevents confusion between what you have and what you get.

Note

Stock — a quantity measured at a specific moment. It has no time dimension.

Flow — a quantity measured per unit of time. It has a time dimension (per day, per month, per year).

Examples from your NCERT textbook:

Stock	Flow
Wealth	Income
Capital	Investment
Money supply (on a given date)	Money supply growth (per year)
Population (on 1 Jan)	Births (per year)
Water in a tank	Water flowing in per minute

Notice: a stock can change only because of flows. If you add water (inflow) and remove water (outflow), the stock changes. This gives us a simple identity:

\text{Stock at end} = \text{Stock at start} + \text{Inflow} - \text{Outflow}

In national income accounting, this becomes:

K_t = K_{t-1} + I_t - D_t

Where:

$K_t$ = capital stock at the end of year $t$ (a stock)
$K_{t-1}$ = capital stock at the start of year $t$ (a stock)
$I_t$ = gross investment during year $t$ (a flow)
$D_t$ = depreciation during year $t$ (a flow)

Why it matters

If you mix up stock and flow, you make serious errors. For example:

“India’s national income is ₹200 lakh crore” — that’s a flow (per year).
“India’s national wealth is ₹1,000 lakh crore” — that’s a stock (at a point).

You cannot compare them directly. A country with a high income (flow) might have low wealth (stock) if it spends everything. A rich country (high stock) might have low current income.

Another classic mistake: “Investment is part of capital.” No — investment is a flow that adds to the stock of capital. Capital is the accumulated result of past investments.

A diagram in words

In the economy: …

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Part (a): Correct alternative is (A) — Statement 1 true, Statement 2 false.

Part (b): Correct alternative is (B) — Annual expenditure of a school is a flow variable.

Part (a)

The distinction between stock and flow depends on how the variable is measured over time.

A stock variable is a quantity measured at a single point of time — a static snapshot. Examples: capital, wealth on a date, money in a bank account on a given day, national debt on 31st March.
A flow variable is a quantity measured over an interval of time — a rate that accumulates. Examples: income per year, expenditure per month, national output per year.

Evaluating the statements:

Statement 1 — "Stock variables are measured at a point of time." This matches the definition of a stock exactly → true.
Statement 2 — "Flow variables and stock variables are same." They are fundamentally different: a stock changes because of flows (like the water in a tank changing due to inflow/outflow), but they are not identical → false. …

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