How do you calculate marginal efficiency of capital?
Regarding this, what is meant by marginal efficiency of capital?
The term “marginal efficiency of capital” was introduced by John Maynard Keynes in his General Theory, and defined as “the rate of discount which would make the present value of the series of annuities given by the returns expected from the capital asset during its life just equal its supply price”.
Similarly, how does marginal efficiency of capital relate to the rate of interest? The marginal efficiency of capital displays the expected rate of return on investment, at a particular given time. The marginal efficiency of capital is compared to the rate of interest. This theory suggests investment will be influenced by: The marginal efficiency of capital.
In this regard, what is marginal efficiency of capital and investment?
Generally, marginal efficiency of capital or MEC refers to the expected rate of profit or the rate of return from investment over its cost. Marginal efficiency of a given capital asset is the highest return that can be yielded from the additional unit of that capital asset.
What is MEC schedule?
General Schedule of Marginal Efficiency of Capital (MEC)! The general marginal efficiency of capital (i.e., the marginal efficiencies of all types of capital assets during a given period) represents the schedule of the marginal efficiency of capital.