The correct option is 2 and 3 only.
Explanation
In macroeconomics, variables are categorized into stock and flow concepts based on their time dimension. A stock variable is measured at a specific point in time (e.g., wealth, inventory), whereas a flow variable is measured over a period of time (e.g., income, expenditure).
Statement-wise Analysis
- Statement 1 is Incorrect: The demand for money represents the preference for liquidity or the desire to hold assets in the form of money rather than investments. Since this preference is measured at a specific instant (e.g., "How much cash do I want to hold right now?"), it is a stock concept, not a flow concept.
- Statement 2 is Correct: The demand for money is technically defined as the stock of money that people are willing to hold at a particular point in time. It reflects the relationship between the quantity of money demanded and economic variables like interest rates and income levels at a specific moment.
- Statement 3 is Correct: The velocity of money refers to the frequency with which a unit of currency is used to purchase domestically produced goods and services within a given time period. Since it measures the rate of circulation over a period of time (e.g., per year), it is a flow concept.
Key Takeaway: Money supply and demand for money are stock concepts (measured at a point in time), whereas the velocity of money, income, and GDP are flow concepts (measured over a duration).