Question

identify and briefly state the significance of Marginal Efficiency of Capital to the history of economic thought

Answer 1

As per Keynes, it is the rate of discount which would make the present value of the series of annuities given by the returns expected form the capital asset during its life just equal to its supply price.

It displays the expected rate of return on investment, at a particular given time.

Keynes used it as an explanation of the short term fluctuations in the level of economic activity and the business cycle. It is an important determinant in the profit margin of the firms and business decision making.