PATHSHALA(KISHAN BHUTANI)
Theory of National Income
Stock and flow: -
Stock variable refers to that variable which is measured at a
particular point of time. It does not have time dimension for logo
stock of goods as on 31 march 2017, money supply, national
wealth etc.
Flow variable refers to that variable which is measured over a
period of time. It has time dimension (like an hour a day a week
etc.) for example: national income, water flow, wheat produced
in a year.
Difference b/w stock & flow -
Basis stock flow
Meaning Stock variable refers to It refers to that
that variable which is variablewhich is
measured at a particular measured over a
point of time. period of time.
time It does not have It has time
dimension time dimension dimension.
accept stock is a flow is a dynamic
static concept concept.
example money supply national income,
machine etc. water flow etc.
Real Flow: -
KISHAN BHUTANI(8898100300)
, PATHSHALA(KISHAN BHUTANI)
Real flow refers to the flow of factors services from house
hold to firm and responding flow of goods and services front firm
to household. It is also known as physical flow. It includes only
exchange of goods and service without in evolvement of money.
Factor Service
household Firm
goods services
Money flow refers to flow of factor payment front firm to
household for rendering their factor services and corresponding,
expenditure on goods and services from household to firm for
purchase of good and services. It is also known as nominal; flow.
Factor payment
house hold Firm
exp on goods & service.
Diff B/w real flow & money flow-
Basis real flow money flow
meaning it is a flow of goods it is a flow of
& Service between firm money between
and household firm & household.
kinds it is waves exchange it involves exchange
exchange of goods & services of money.
difficulty there may be same there is no such
KISHAN BHUTANI(8898100300)
, PATHSHALA(KISHAN BHUTANI)
difficulty of barter difficulty in case
exchange system in exchange of money flow
of goods & services.
Alternative it is also known it is also known as
name as physical flow nominal flow.
Factor Income -
Factor income refers to income received by factor of
production for revering their factors services for logo rent, wages,
interest and profit.
Transfer Income-
Transfer income refers to income received without
rendering any productive service in return for e.g., pocket money
scholarship, old age pensions, etc.
Difference between-
Basis Factor income transfer income
meaning It refers to income It refers to income
received by factors of received with out
production for rendering rendering any
their factor services in productive service
KISHAN BHUTANI(8898100300)
, PATHSHALA(KISHAN BHUTANI)
production process. in return.
Nature It is included in It is neither included
both national income national income or in
& Domestic income. Domestic Income.
concept. It is earning concept It is a receipt concept.
Example rent, interest, Scholarship, pocket money
wages, profit etc. unemployment’s allowances.
Type of final goods: -
---Consumption goods
--- Capital goods
Diff b/w
BASIS Depreciation Capital loss
Meaning Fall in the value of loss in the value of
fixed asset due to fixed asset due to
normal wear & tear, any natural
expected obsolesce calamities, accidents
& Passage of time. theft etc
Provision Provision is made No Such provision is
for dep. as it is an made in the case of
expected loss. capital loss as it is an
unexpected loss.
KISHAN BHUTANI(8898100300)
Theory of National Income
Stock and flow: -
Stock variable refers to that variable which is measured at a
particular point of time. It does not have time dimension for logo
stock of goods as on 31 march 2017, money supply, national
wealth etc.
Flow variable refers to that variable which is measured over a
period of time. It has time dimension (like an hour a day a week
etc.) for example: national income, water flow, wheat produced
in a year.
Difference b/w stock & flow -
Basis stock flow
Meaning Stock variable refers to It refers to that
that variable which is variablewhich is
measured at a particular measured over a
point of time. period of time.
time It does not have It has time
dimension time dimension dimension.
accept stock is a flow is a dynamic
static concept concept.
example money supply national income,
machine etc. water flow etc.
Real Flow: -
KISHAN BHUTANI(8898100300)
, PATHSHALA(KISHAN BHUTANI)
Real flow refers to the flow of factors services from house
hold to firm and responding flow of goods and services front firm
to household. It is also known as physical flow. It includes only
exchange of goods and service without in evolvement of money.
Factor Service
household Firm
goods services
Money flow refers to flow of factor payment front firm to
household for rendering their factor services and corresponding,
expenditure on goods and services from household to firm for
purchase of good and services. It is also known as nominal; flow.
Factor payment
house hold Firm
exp on goods & service.
Diff B/w real flow & money flow-
Basis real flow money flow
meaning it is a flow of goods it is a flow of
& Service between firm money between
and household firm & household.
kinds it is waves exchange it involves exchange
exchange of goods & services of money.
difficulty there may be same there is no such
KISHAN BHUTANI(8898100300)
, PATHSHALA(KISHAN BHUTANI)
difficulty of barter difficulty in case
exchange system in exchange of money flow
of goods & services.
Alternative it is also known it is also known as
name as physical flow nominal flow.
Factor Income -
Factor income refers to income received by factor of
production for revering their factors services for logo rent, wages,
interest and profit.
Transfer Income-
Transfer income refers to income received without
rendering any productive service in return for e.g., pocket money
scholarship, old age pensions, etc.
Difference between-
Basis Factor income transfer income
meaning It refers to income It refers to income
received by factors of received with out
production for rendering rendering any
their factor services in productive service
KISHAN BHUTANI(8898100300)
, PATHSHALA(KISHAN BHUTANI)
production process. in return.
Nature It is included in It is neither included
both national income national income or in
& Domestic income. Domestic Income.
concept. It is earning concept It is a receipt concept.
Example rent, interest, Scholarship, pocket money
wages, profit etc. unemployment’s allowances.
Type of final goods: -
---Consumption goods
--- Capital goods
Diff b/w
BASIS Depreciation Capital loss
Meaning Fall in the value of loss in the value of
fixed asset due to fixed asset due to
normal wear & tear, any natural
expected obsolesce calamities, accidents
& Passage of time. theft etc
Provision Provision is made No Such provision is
for dep. as it is an made in the case of
expected loss. capital loss as it is an
unexpected loss.
KISHAN BHUTANI(8898100300)
