In a stock-flow consistent macroeconomics, we have to always trace the impact of flows during a period on the relevant stocks at the end of the period. Accordingly, if household consumption expenditure out of disposable income rises by 80 cents in each extra dollar received, then the residual will flow into the stock of saving.
Answer: False
The answer is False.
This is a very easy test of the difference between flows and stocks. All expenditure aggregates - such as government spending and investment spending are flows. They add up to total expenditure or aggregate demand which is also a flow rather than a stock.
Aggregate demand (a flow) in any period) determines the flow of income and output in the same period (that is, GDP).
Flows can also be added together to form a "larger" flow.
Saving is a residual flow left after household consumption decisions out of disposable income are made.
The flow of saving adds to wealth in the form of financial assets.
That is enough for today!
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