ABSTRACT
In this chapter the simple Walrasian model is discussed in the context of money, financial assets, and production. The chapter clearly illustrates the firm's objective, that is, to maximize profits. However, the firm is constrained in that it must finance purchases of capital and equipment as well as pay its workers. Moreover, attention is paid to all the costs faced by the firm, not just the obvious ones. The investment and financing decisions of firms are discussed and issues related to Tobin's Q and debt-to-equity are explored. This chapter provides a detailed examination of the role that firms play in the macroeconomy.
