Question: What Is Flow Variable In Economics?

Is money a flow variable?

The weath of any economic unit is its assets (the things that it owns, including IOUs from other economic units) minus its liabilities (what it owes to other units).

Wealth is measured in dollars at a point in time and is a stock variable.

Saving is measured in dollars per unit time and is a flow variable..

What is stock and flow resources?

Stock resources are resources that can be permanently expended, and are therefore non-renewable, and whose quantity is usually expressed in absolute amounts rather than in rates. … Flow resources are not permanently expendable, i.e., they are renewable, under usual circumstances; they are resources that are replaced.

What are the three phases of circular flow of income?

There are three different phases in circular flow of national income, viz. production, income and expenditure. They represent three related aspects, namely, production (i.e., generation of income), distribution (of income) and disposition (of income, i.e., expenditure).

What are the two basic principles of circular flow of income?

The circular flow of income involves two basic principles: (ii) Goods and services flow in one direction and the money payment to acquire them, flow in the return direction giving rise to a circular flow.

Which one is not a flow variable?

National wealth is not an example of flow variable. It is a stock since it is measured at a point of time. National wealth is not time dimensional. It is not measured over a specified period of time like flow.

What is high power money?

High powered money or powerful money refers to that currency that has been issued by the Government and Reserve Bank of India. Some portion of this currency is kept along with the public while rest is kept as funds in Reserve Bank. Thus, we get the equation as: H = C + R.

What is a flow variable?

A flow variable is measured over an interval of time. Therefore, a flow would be measured per unit of time (say a year). … 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.

What are examples of flow variables?

A flow variable is a quantified variable that is measured over a specified period of time. It is time bounded and expressed as per unit of time. National income, investment in the economy and aggregate supply- all are flow variables since they relate to a period of time.

Why is GDP a flow variable?

For example, GDP is a flow because it is the sum of all the flows during a year. … So GDP refers to the sum of what occurs over a year and not what is left over at the end of year. Stocks are important because they are the infrastructures for living and producing.

What are the two types of circular flow?

The two types of circular flows are: (i) Real flow (ii) money flow.

What does circular flow mean?

The circular flow model demonstrates how money moves through society. Money flows from producers to workers as wages and flows back to producers as payment for products. In short, an economy is an endless circular flow of money. … For that reason, the model is also referred to as the circular flow of income model.

Is interest a flow variable in economics?

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.