Question

In: Finance

The wealth of an economy is generated by real assets. The availability of tradable financial assets...

The wealth of an economy is generated by real assets. The availability of tradable financial assets has no effect on the wealth of an economy. Do you agree? Why or why not?

Solutions

Expert Solution

Here, first let's have a look at the meaning of Real assets and Financial assets.

Real assets are physical assets that have an intrinsic worth due to their substance and properties. Real assets include precious metals, commodities, real estate, land, equipment, and natural resources.

whereas,Financial assets are a liquid property that derives value from a contractual right or ownership claim. Stocks, bonds, mutual funds, bank deposits, investment accounts, and good old cash are all examples of financial assets. They can have a physical form, like a dollar bill or a bond certificate, or be nonphysical—like a money market account or mutual fund.

Now, if we compare both the types of assets,

Firstly,Real assets tend to be more stable than financial assets.Secondly, Inflation, shifts in currency values, and other macroeconomic factors affect real assets less than financial assets.

Apart from this,Real assets are particularly well-suited investments during inflationary times because of their tendency to outperform financial assets during such periods.

From the above given reasons it can be said that real assets help the economy in generating the wealth in a mature way still we can overlook the advantages of Financial assets like liquidity,easy to convert apart from that the cashflow generated by the financial assets experience a constant growth in comparision to real assets where the factor like depericiation,devaluation etc. may play roles.

Hence,in a nutshell it can be said that definitely Real assets are the base of any economy for wealth creation, the financial assets at the same time has crucial role to play in the upcoming scenario.


Related Solutions

Which of the following are real assets, and which are financial? a. A share of stock....
Which of the following are real assets, and which are financial? a. A share of stock. b. A personal IOU. c. A trademark. d. A factory. e. Undeveloped land. f. The balance in the firm’s checking account. g. An experienced and hardworking sales force. h. A corporate bond. Which of the following statements always apply to corporations? a. Unlimited liability. b. Limited life. c. Ownership can be transferred without affecting operations. d. Managers can be fired with no effect on...
a) Which of the following are real assets, and which are financial? A Share of Stock...
a) Which of the following are real assets, and which are financial? A Share of Stock A Personal IOU A Trademark A Factory Undeveloped Land The Balance in the Firm’s Checking Account An Experience and Hard Working Sales Force A Corporate Bond               b) Identify and briefly describe the financial functions in the financial system.               c) Identify the financial system’s major components and their roles.               d) Describe the MI definition of the money supply and indicate the relative...
The money stock in the economy is a. the amount of wealth accumulating in the economy,...
The money stock in the economy is a. the amount of wealth accumulating in the economy, such as curreney and demand deposits  b, the amount of wealth accumulating in the economy, such as money market mutual funds and stocks. c. the quantity of money circulating in the economy, such as currency and demand deposits. d. the quantity of money circulating in the economy, such as money market mutual funds and stocks
What are two examples of real assets and two examples of financial assets (extra credit for creativity)?
What are two examples of real assets and two examples of financial assets (extra credit for creativity)?If you have assets of $1000 and liabilities of $500 what is your net worth?What is one major difference between equity and fixed income securities?
Explain whether the following assets are a real asset or a financial asset. A certificate of...
Explain whether the following assets are a real asset or a financial asset. A certificate of deposit at your local bank A two-bedroom house $50,000 worth of bonds from an airline company Ownership of a copyright to a hit song
Investment is the current commitment of money, based on research, to real & or financial assets...
Investment is the current commitment of money, based on research, to real & or financial assets for a period of time in order to increase the investors wealth over the long term. Investment institutions have clients ranging from individuals, companies & pension and provident funds to estates and trusts, insurance companies. 1.1. What is the impact of COVID-19 on pension funds, insurance and investments
Health care financial managers stand between the company's real assets and the financial markets where the...
Health care financial managers stand between the company's real assets and the financial markets where the firm raises the firm's cash. The responsible financial manager will not fixate on short-term financial gain for the shareholder, but rather concentrate on the long-term interests of the company. The maximizing shareholder value approach means that decisions about strategy and tactics are based primarily on financial considerations. With the mission of maximizing shareholder value in mind, how could the health care financial manager help...
Explain how financial assets will be allocated? What sectors of the economy will be chosen and...
Explain how financial assets will be allocated? What sectors of the economy will be chosen and excluded?
How contingent Assets are generated? Give two examples of contingent assets in detail.
How contingent Assets are generated? Give two examples of contingent assets in detail.
“In theory, the financial sector is supposed to support the long-term growth of the real economy....
“In theory, the financial sector is supposed to support the long-term growth of the real economy. In practice, it has become so detached from the real world that it is more akin to a fantasy land, inhabited by a growing number of peculiar characters undertaking nonsensical tasks.” Source: Stewart Investors Sustainable Funds Group, Alice in Financeland, (Feb 2017). Please respond to the following questions by drawing upon relevant concepts/theories you have learnt in this unit. Discuss why capital markets have...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT