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Stocks and Flows, Depreciation and Investment
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This lesson discusses about the concepts of stocks, flows, investment and depreciation

Arpita Prakash
YouTuber NCERTs series initiator at Unacademy 'Educator of the Month' for Feb'19 CBSE 0.1% Merit Certificate holder in Mathematics

Unacademy user
u r the sole of me being still in preparation... plz keep guiding
  1. Stocks and Flows o Flows- defined over a period of time Income, Output or profits are concepts which make sense only when a time period is specified - Time period needed to get a quantitative measure Many are expressed annually like annual profits of production - Eg-salary of someone is Rs10k ( daily, monthly, annually ?) o Stocks-defined at a particular point of time - Eg Capital goods/ Consumer durables once produced don't get consumed in a delineated time period Serve through different cycles of production - Machines in a factory are there irrespective of specific time period ( can be additions/ deductions) o Change in stock is measured over a period of time (how many machines were added this year) - These changes are then flows o Eg: Filling of a tank with water coming from a tap Flow-amount of water flowing into tank from tap per minute Stock-How much water is there in tank at a particular point of time

  2. . Gross investment of an economy- o Part of our final output comprising of capital goods o Eg: Machines, tools, implements, buildings, roads etc Depreciation: o Deletion made from the value of gross investment to accommodate regular wear and tear of capital o A part of capital goods produced this year goes for replacement of existing capital goods (wear, tear-> maintenance, replacement) Hence not an addition to stock of capital goods already existing Value needs to be subtracted from gross investment to arrive at net investment Net Investment: o Also called New Capital formation - measures new addition to capital stock in an economy o NI Gross Investment Depreciation Depreciation in detail o Annual allowance for wear and tear of a capital good o Cost of good divided by number of years of it's useful life o Annually accounted for even if no real expenditure may have been actually incurred each year