Stocks and flows, Macroeconomics

 

Stocks and Flows 

When studying economics, one must be sure whether the variable being studied is a stock variable or a flow variable. Failure to do so can cause faulty economic reasoning. Stocks and flows are both variables that may increase or decrease with time. The crucial difference between the two is that one is measured at a specified point of time, whereas the other is measured for a specified period of time. For example, the total number of persons employed in India is a stock variable, whereas the number of persons who get new jobs is a flow variable. The balance sheet of a company is a stock statement, whereas the profit and loss account is a flow statement. From macroeconomics, money supply, consumer price index, unemployment level, foreign exchange reserves, etc. are examples of stock variables. GDP, inflation, exports, imports, consumption, investment, etc. are examples of flow variables. 

Some flow macroeconomic variables have a direct counterpart stock macroeconomic variables. For example, investment and capital stock, and inflation and price index. Flow variables which do not have direct stock counterpart are exports, wages, taxes, etc. Though these variables may not have direct stock counterparts, they could indirectly affect other stocks.Although a stock can change only as a result of flows, the flows themselves may be determined in part by changes in stock. For example, a country's capital stock is determined by the level of investment. However, the flow of investment itself may depend partly on the size of the capital stock. In many theories of the business cycle, a critical factor explaining the business downturns is the decrease in the investment brought on by an excessive stock of capital resulting from an earlier, prolonged upsurge in investment.The purpose of this section is to familiarize the reader with a number of macroeconomic concepts that we will be dealing with throughout this book. We shall briefly explain here some of the many basic concepts which permeate through the macroeconomic theory. 

Posted Date: 9/11/2012 4:32:06 AM | Location : United States







Related Discussions:- Stocks and flows, Assignment Help, Ask Question on Stocks and flows, Get Answer, Expert's Help, Stocks and flows Discussions

Write discussion on Stocks and flows
Your posts are moderated
Related Questions
Once Y is determined, almost all of the other variables are determined since they are either exogenous or they depend on Y. From Y we can determine C by consumption function, I m

Suppose the demand for bread is D(p), where dD/dp Illustrate equilibrium with price on the Y-axis and quantity on the X-axis in which the t > 0. Show the economic incidence

In our 2 period consumption savings model (with no leisure, u(c1, c2), suppose interest income in period 2 is taxed at the rates, where 0 a) Write down period 1 and period 2 bu

market structurs

Shambles, a large toy retailer, are looking at bringing out a new range of soft toys. The range under consideration is "Mythical Beasts."  The "Mythical Beasts" range will cost £50

How is economics works with interaction of individual choices? Principles behind the interaction of individual choices: 1. There are gains through trade. • Specialization

A) Suppose Jean Splicer, an investor, buys $300,000 of shares of stock in a diversified bundle of Bio-tech firms and exactly one year later sells those shares for $315,000. Assume

what are some internal market forces and how is the outcome of output, jobs, prices, growth, and international balance

Explain the Real wage with example Consider following scenario. You work full time and during January 2008 you make 2000 euro after tax. A specific basket of services and good

Describe the Structural unemployment Individuals who are unemployed as their skills are no longer in demand where they live. This kind mainly results in longer spells and may r