Stock and Flow

In macroeconomics, stock and flow are two ways of measuring economic variables based on time.

To understand the difference, imagine a water tank. The water level in the tank represents a stock—a quantity at a specific moment. Water flowing in from the tap is an inflow, while water draining out is an outflow measured in liters per minute. These flows are variables that cause stock to change over time. This analogy mirrors how stocks and flows variables function in economics.

A stock is measured at a particular moment. For example, Alex checks his savings account and sees $5,000—this is a stock, reflecting how much he has at that moment.

In contrast, a flow is measured over a duration. If Alex earns three thousand dollars per month, that monthly income is a flow—it represents a continuous activity occurring over time. Similarly, if he spends one thousand dollars per month on groceries and utilities, that expenditure is also a flow—it reduces his savings over time.

In simple terms, stocks are snapshots of accumulated amounts, while flows are the ongoing changes that increase or decrease those amounts.