Question

How marginal efficiency of capital related to investment in an economy

Answer 1

Answer:

Marginal Efficiency of Capital (MEC) and Investment Demand Function. Businessmen and entrepreneurs are induced to make an investment when the return on investment is attractive. ... Generally, marginal efficiency of capital or MEC refers to the expected rate of profit or the rate of return from investment over its cost.

Answer 2

Answer:

The marginal efficiency of capital (MEC) is that rate of discount which would equate the price of a fixed capital asset with its present discounted value of expected income. ... It is calculated as the profit that a firm is expected to earn considering the cost of inputs and the depreciation of capital.