Correct Option
The correct option is 1 and 3 only.
Explanation
In macroeconomics, variables are classified into two categories based on the time dimension of their measurement:
- Stock Variables: Measured at a specific point in time (e.g., wealth, capital, inventory).
- Flow Variables: Measured over a period of time (e.g., income, investment, depreciation).
Statement-wise Analysis
- Statement 1 is Correct. A machine is a durable asset that exists at a specific point in time. It forms part of the capital stock of an economy or firm. Since the machine persists and provides services over multiple years, it remains a component of the stock at any given moment during its lifespan.
- Statement 2 is Incorrect. Investment is defined as the addition to the capital stock. A machine is considered a flow of investment only in the specific period (year) it is produced or purchased. In subsequent years, it is part of the existing stock, not a new flow of investment goods.
- Statement 3 is Correct. Depreciation refers to the loss in the value of fixed assets (capital stock) due to wear and tear, obsolescence, or accidental damage. Since this loss occurs and is measured over a period of time (e.g., annually), it is a flow concept.
Key Takeaway
Capital is a stock concept (measured at a point in time), whereas Investment (addition to capital) and Depreciation (consumption of capital) are flow concepts (measured over a period).