Question
‘Marginal efficiency of capital’ is
Answer: Option D
Answer: (d)
The volume of investment depends upon the following two factors:
rate of interest; and
marginal efficiency of capital.
Before investing the money a businessman compares interest with the rate of marginal efficiency capital. If they expect that rate of profit will be greater than the rate of interest, then they invest the money otherwise not. The expected rate of return on capital is called the marginal efficiency of capital.
In other words, the marginal efficiency of capital is a return on investment which is based partly on expectations of future yields and partly on the actual price of the capital good concerned.
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Answer: (d)
The volume of investment depends upon the following two factors:
rate of interest; and
marginal efficiency of capital.
Before investing the money a businessman compares interest with the rate of marginal efficiency capital. If they expect that rate of profit will be greater than the rate of interest, then they invest the money otherwise not. The expected rate of return on capital is called the marginal efficiency of capital.
In other words, the marginal efficiency of capital is a return on investment which is based partly on expectations of future yields and partly on the actual price of the capital good concerned.
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