Question

A firm’s capital at the beginning of the year is ₹ 10 crores and new investment during the year is ₹ 3 crores. Identify the stock and flow variables in the statement.

Hint:

Stock variables refer to quantities measured at a specific point in time, while flow variables refer to quantities measured over a period of time.

Answer 1

Step 1: Define Stock and Flow Variables.
In economics, a stock variable is one that is measured at a particular point in time, whereas a flow variable is one that is measured over a period of time.
Step 2: Identify the Stock Variable.
The capital of the firm at the beginning of the year is ₹ 10 crores. This is a stock variable because it represents the total capital accumulated at a specific point in time (at the beginning of the year).
Step 3: Identify the Flow Variable.
The new investment during the year is ₹ 3 crores. This is a flow variable because it represents the change in capital over a period (the year).