Posted by Anjali Kaur on Jun 22, 2020

What do we mean by Stock and Flow concepts?

These terms are commonly used in macroeconomics, National income accounting. We have seen the meaning of National Income and also some basic conversion formulas under National Income Accounting. Now we will discuss another important concept that is the stock and flow concepts. Let’s learn

What do we mean by Stock Concept?

A stock is a quantity measured at a particular point in time. For example; on January 1, 2019, you have 2000 rupees in your bank account is a stock concept, Rs. 2000 note lying in the wallet of Rohini, a student is also an example of Stock Variable. All such values are stock values as they are measured at a specific point of time. Other examples of the stock concept include capital, money supply, etc

What do we mean by Flow concept?

A flow concept is a quantity measured over a specific period. For example; your pocket allowance is 1500 rupees, per month on which you will get 4% annual interest by the bank. So, this value is a flow concept because they are measured over an hour, a month, an year. 

Difference between stock and flow concept

StockFlow
It refers to those variables which are measured at a particular point in time.It is a measured over a period of time or during a month.
It is not a time dimensional.It is a time dimensional concept.
It is a static concept.It is a dynamic concept.
Example; the stock of goods as on 1 Jan 2020Example; production of goods during the month of Jan 2020.

All examples of stock and flow concept:

Stock Concept ExamplesFlow Concept Examples
WealthIncome
Water in a tankInvestment
Bank depositsWater in a stream
CapitalInterest on capital
Machinery of a sugar millCapital formation
Loans taken by country from ROWMonetary expenditure like electricity bills
Distance between delhi and chandigarhProduction
Rice stored in a godown area
Money supply

Tip: The stock concept has “as on” and flow concept has “during a month/ over a period” terms for identification.

Relation between stock and flow concept

They both are inter-related to each other. The stock has an influence overflow variable, that is, it can change the flow variable. For example, an increase in bank deposit(stock) can cause an increase in the income of a consumer in the form of interest. 

Test Yourself

Identify the following into stock and flow concept.

  1. A wealth of a nation
  2. National income
  3. Depreciation of a machine
  4. Losses
  5. Profits
  6. Savings
  7. Closing stock
  8. Production
  9. Gross Domestic Product
  10. Balance in a bank account
  11. Money supply
  12. The population of India as on 31st March 2019

Solution: 

  1. A wealth of a nation- Stock Concept
  2. National income – Flow Concept
  3. Depreciation of a machine- Flow Concept
  4. Losses- Flow Concept
  5. Profits- Flow Concept
  6. Savings-Flow Concept
  7. Closing stock- Stock Concept
  8. Production – Flow Concept
  9. Gross Domestic Product- Flow Concept
  10. Balance in a bank account – Stock Concept
  11. Money supply- Stock Concept
  12. The population of India as on 31st March 2019- Stock Concept

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