[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

Flows and Stocks
GDP is a measure of output per year. Rate measurements such as these are called
flows. When a financial reporter says, “The quarterly GDP statistic, just released,
shows that GDP was $10 trillion per year,” she does not mean that $10 trillion of
goods and services were produced during the quarter. Rather, the production during
the quarter was $2.5 trillion; and if that rate were sustained for a whole year, the
total value of goods and services produced would be four times as much: $10 trillion.
Flow statistics need to be contrasted with stock statistics, which measure an
item at a single point in time. The unemployment rate is a stock—the number of
workers unemployed in a particular month as a fraction of the total labor force in that
month. Another important figure is the capital stock—the total value of all the buildings
and machines that underlie the economy’s productive potential. The amount
in your bank account is a third example of a stock statistic.
The relationship between stocks and flows is simple. The stock of capital at the
end of 2000, for example, consists of the stock of capital at the end of 1999 plus or
minus the flows into or out of the stock during 2000. Investment is the flow into the
stock of capital. Depreciation is the flow out of the capital stock.
FLOWS AND STOCKS ∂ 505