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There are some who would argue that this verse suggests that in order to prove one is faithful that they must DO "works". Which would then imply that we must do something (ie: acts of service) in order to earn our way into heaven.
But there is nothing we could ever do to earn our way into heaven. That's the beauty of Jesus' sacrifice. He gave his life for us freely, and there is nothing we could ever do or give that could repay that kind of gift. I interpret this verse as saying that our faith causes us to live lives of service, not because we have to but because we want to.
I can also interpret this verse to be saying that if someone says they have faith, but does not show it through their acts (the way they live), that their faith is non-existent or, at the very least, questionable.
This verse reminds me of another verse (John 13:35) which inspired the song "They'll Know We Are Christians".
Please understand that this is a very simplified version of what I believe/feel about this verse. Please feel free to share your own thoughts.