Answer:

A flow is a quantity which is measured with reference to a period of time. Thus, flows are defined with reference to a specific period (length of time), e.g., HOURS, days, weeks, months or years. It has time dimension. National income is a flow. It describes and measures flow of goods and services which become AVAILABLE to a country during a year.

Similarly, all other economic variables which have time dimension, i.e., whose magnitude can be measured over a period of time are called flow variables. For instance, income of a person is a flow which is earned during a week or a month or any other period. Likewise, investment (i.e., addition to the stock of capital) is a flow as it pertains to a period of time.

Other examples of flows are: expenditure, savings, depreciation, interest, exports, imports, change in inventories (not mere inventories), change in money supply, lending, BORROWING, rent, profit, ETC. because magnitude (SIZE) of all these are measured over a period of time.

(b) Stock Variables:

A stock is a quantity which is measurable at a particular point of time, e.g., 4 p.m., 1st January, Monday, 2010, etc. Capital is a stock variable. On a particular date (say, 1st April, 2011), a country owns and commands stock of machines, buildings, accessories, raw materials, etc. It is stock of capital. Like a balance-sheet, a stock has a reference to a particular date on which it shows stock position. Clearly, a stock has no time dimension (length of time) as against a flow which has time dimension.