McqMate

Q. |
## 'Marginal efficiency of capital' is - |

A. | expected rate of return on new investment |

B. | expected rate of return of existing investment |

C. | difference between rate of profit and rate of interest |

D. | value of output per unit of capital invested |

Answer» A. expected rate of return on new investment | |

Explanation: The volume of investment depend upon the following two factors: (1) rate of interest: and (2) marginal efficiency of capital. Before investing the money a businessman compares interest with the rale 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, 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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