Which of the following pairs is correctly matched?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Machines added to the capital stock of a firm during the year – Flow
A stock is measured at a point of time. A flow is measured over a period of time, and a change in a stock over a period is a flow.
Option (1) Water flowing into a tank from a tap per minute – Stock — Incorrect. It is measured per minute, so it is a flow. The water in the tank at a moment is the stock.
Option (2) Inventory of a firm at the end of the year – Flow — Incorrect. It is measured at one point of time, so it is a stock.
Option (3) Change in inventories of a firm during the year – Stock — Incorrect. The change takes place over a period, so it is a flow.
Option (4) Machines added to the capital stock of a firm during the year – Flow — Correct. New machines added in a year are a change in stock, measured over that year.
NCERT (2026-27): “2.1 SOME BASIC CONCEPTS OF MACROECONOMICS … These are called stocks. Stocks are defined at a particular point of time. However we can measure a change in stock over a specific period of time like how many machines were added this year. Such changes in stocks are thus flows, which can be measured over specific time periods. A particular machine can be part of the capital stock for many years (unless it wears out); but that machine can be part of the flow of new machines added to the capital stock only for a single year when it was initially installed. To further understand the difference between stock variables and flow variables, let us take the following example. Suppose a tank is being filled with water coming from a tap. The amount of water which is flowing into the tank from the tap per minute is a flow. But how much water there is in the tank at a particular point of time is a stock concept.” “2.2.1 The Product or Value Added Method … Inventory is a stock variable. … Notice that change in inventories takes place over a period of time. Therefore it is a flow variable.” |