What Is the Relationship Between the Real Side of the Economy

question 80

Essay

What is the relationship between the real side of the economy (economic activity that results in the creation of real assets)and the financial side of the economy (economic activity that results in the production of financial assets)? Your discussion should cover the following points: How does the production of real assets differ from the production of financial assets? Does the creation of financial assets really contribute to overall economic productivity? Do financial assets make a country richer or poorer? What role do financial assets serve (if any)in facilitating the production of real assets?

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Definitions:

Production

The process of creating goods or services by combining labor, capital, and resources to meet consumer demands.

Market Wage

The prevailing rate of pay for labor in a particular job market, determined by the supply and demand for labor in that market.

Labor Supply

The total hours that workers are willing and able to work at a given wage rate in a given period of time.

Maximize Profits

The process by which a firm chooses its production level and pricing strategy to earn the highest possible profit based on its costs and market demand.