In a stock-flow consistent macroeconomics, we know that flows during a period add to relevant stocks at the end of the period. Accordingly, government and private investment spending are two examples of spending flows that add to the stock of aggregate demand which in turn impacts on Gross Domestic Product (National Income) because spending equals income.
Answer: False
The answer is false.
Spending definitely equals income but that is not the point of the question, which is, in fact, 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 and it jointly determines the flow of income and output in the same period (that is, GDP) (in partnership with aggregate supply).
So while flows can add to stock - for example, the flow of saving adds to wealth or the flow of investment adds to the stock of capital - flows can also be added together to form a "larger" flow.
For example, if you wanted to work out annual GDP from the quarterly national accounts you would sum the individual quarterly observations for the 12-month period of interest. Conversely, employment is a stock so if you wanted to create an annual employment time series you would average the individual quarterly observations for the 12-month period of interest.
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