Marginal Efficiency of Capital (MEC)
Macro Economics
Sem VIII
- According to Keynes, the marginal efficiency of capital is “that rate of discount which makes the present value of the series of annuities given by returns expected from the capital asset during its life just equal to its supply price.”
- It is also known as Internal Rate of Return (IRR).
TipMarginal Efficeny of Capital (MEC)
MEC is the rate of discount which makes the discounted present value of expected income stream equal to the cost of capital.