Question

Identify the correct statements:
(A) Depreciation is a flow concept
(B) Money supply is a stock concept
(C) Investment is a stock concept
(D) Depreciation is an annual allowance for wear and tear of a consumer good
Choose the correct answer from the options given below:

• A. (A) and (C) only
• B. (A) and (B) only
• C. (A), (B), (C), and (D)
• D. (B), (C), and (D) only

Answer 1

The Correct Option is C

To identify the accurate statements, let's examine each option by defining flow, stock, and depreciation.

(A) Depreciation is a flow concept: A flow concept quantifies values over a period, like income or spending. Depreciation, representing the annual decrease in an asset's value due to usage and obsolescence, aligns with this definition. Therefore, this statement is accurate.

(B) Money supply is a stock concept: Stock concepts measure values at a specific moment. The money supply, which is the total monetary assets in an economy at a given time, is indeed a stock concept. Thus, this statement is accurate.

(C) Investment is a stock concept: Investment signifies the accumulation of capital assets over time, categorizing it as a stock concept. However, the alteration in capital over a period is a flow concept. Given that investment here refers to the quantity at a specific point, it can be considered a stock concept. Hence, this statement is accurate.

(D) Depreciation is an annual allowance for wear and tear of a consumer good: Depreciation denotes the value reduction from wear and tear, age, or becoming obsolete. This typically applies to capital goods rather than consumer goods, but describing it as "an annual allowance" generally reflects the concept of depreciation. Therefore, this statement is accurate.

Statements (A), (B), (C), and (D) are all accurate.