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| 1. |
Distinguish between stock and flow. Give an example of each. |
| Answer» Solution : A stock variable is measured at one specific TIME, and represents a quantity existing at that point in time (say, December 31, 2004), which may have accumulated in the past. A flow variable is measured over an interval of time. Therefore a flow would be measured per unit of time (say a year). Flow is ROUGHLY analogous to rate or speed in this sense. For example, U.S. nominal gross domestic product refers to a total number of dollars spent over a time period, such as a year. Therefore it is a flow variable, and has units of dollars/year. In contrast, the U.S. nominal capital stock is the total VALUE, in dollars, of equipment, BUILDINGS, inventories, and other real assets in the U.S. economy, and has units of dollars. | |