B Com Exam > B Com Notes > Macro Economics > Relation between MEC and MEI - Macro Economic Framework, Macroeconomics
Relation between MEC and MEI - Macro Economic Framework, Macroeconomics | Macro Economics - B Com PDF Download
Marginal Efficiency of Capital(MEC) is the rate of discount which makes the discounted present value of expected income stream equal to the cost of capital.MEC was first introduced by J.M Keynes in 1936.According to him it is an important determinant of autonomous investment.
Marginal Efficiency of Investment(MEI) is the expected rate of return on investment as additional units of investment are made under specified conditions and over a atated period of time.When cost of borrowing is high ,businesses are less motivated to borrow money and make investment on different projects because high cost of borrowing reduces profit margin of the business firms;business firms always cannot raise the price of their product and services to increase profit.
The concepts of marginal efficiency of capital(MEC) and marginal efficiency of investment (MEI) seem similar .There are however some basic differences between MEC and MEI.Some of the basic differences between MEC and MEI are as follows:
The document Relation between MEC and MEI - Macro Economic Framework, Macroeconomics | Macro Economics - B Com is a part of the B Com Course Macro Economics.
All you need of B Com at this link: B Com
|
59 videos|61 docs|29 tests
|
FAQs on Relation between MEC and MEI - Macro Economic Framework, Macroeconomics - Macro Economics - B Com
| 1. What is the relationship between MEC and MEI in the macroeconomic framework? |  |
Ans. MEC (Marginal Efficiency of Capital) and MEI (Marginal Efficiency of Investment) are closely related concepts in macroeconomics. MEC refers to the expected rate of return on an investment project, while MEI represents the additional investment expenditure needed to achieve a certain level of output. The relationship between MEC and MEI can be summarized as follows: If MEC is greater than MEI, it suggests that the expected return on investment is higher than the additional investment required, indicating a profitable project. Conversely, if MEC is lower than MEI, it implies that the expected return is lower than the additional investment needed, indicating an unprofitable project.
| 2. How does MEC impact investment decisions in the macroeconomic framework? | |
Ans. MEC plays a crucial role in investment decisions within the macroeconomic framework. It helps determine the profitability of investment projects by comparing the expected return with the additional investment required. If the MEC is high, indicating a favorable return on investment, businesses are more likely to undertake investment projects. On the other hand, if the MEC is low, indicating a low return on investment, businesses may be hesitant to invest. Therefore, MEC serves as an important factor in guiding investment decisions, as it assesses the potential profitability of projects.
| 3. What factors influence the MEC in the macroeconomic framework? | |
Ans. Several factors influence the MEC within the macroeconomic framework. These factors include interest rates, technological advancements, business expectations, government policies, and the overall economic climate. Higher interest rates tend to decrease the MEC as the cost of borrowing increases. Technological advancements can increase the MEC by improving productivity and reducing costs. Business expectations, such as anticipated changes in consumer demand, can also impact the MEC. Additionally, government policies, such as tax incentives or regulations, can influence the MEC. Finally, the overall economic climate, including factors like inflation and economic stability, can affect the MEC as well.
| 4. How does the MEI impact the level of investment in the macroeconomic framework? | |
Ans. The MEI (Marginal Efficiency of Investment) represents the additional investment expenditure required to achieve a certain level of output. The level of investment in the macroeconomic framework is influenced by the MEI in the following ways. If the MEI is low, indicating that a small amount of additional investment is needed to achieve a desired level of output, it is likely to encourage businesses to invest more. Conversely, if the MEI is high, indicating a significant amount of additional investment is required, businesses may be reluctant to invest. Therefore, a lower MEI typically leads to higher levels of investment, while a higher MEI may discourage investment.
| 5. How can the MEC and MEI be used to assess the overall efficiency of the macroeconomic framework? | |
Ans. The MEC and MEI can be used as indicators to assess the overall efficiency of the macroeconomic framework. If the MEC is consistently higher than the MEI, it suggests that the economy is operating efficiently, as the expected return on investment exceeds the additional investment required. This indicates that businesses are making profitable investment decisions. On the other hand, if the MEC is consistently lower than the MEI, it may indicate inefficiency in the economy, as the expected return on investment is lower than the additional investment needed. This could imply that businesses are not making optimal investment decisions, potentially leading to suboptimal economic growth. Therefore, comparing the MEC and MEI can provide insights into the efficiency of the macroeconomic framework.
Related Exams
About this Document
|
7.8K Views |
|
4.80/5 Rating |
|
Dec 23, 2024 Last updated |
Document Description: Relation between MEC and MEI - Macro Economic Framework, Macroeconomics for B Com 2024 is part of Macro Economics preparation.
The notes and questions for Relation between MEC and MEI - Macro Economic Framework, Macroeconomics have been prepared according to the B Com exam syllabus. Information about Relation between MEC and MEI - Macro Economic Framework, Macroeconomics covers topics
like and Relation between MEC and MEI - Macro Economic Framework, Macroeconomics Example, for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises and tests below for Relation between MEC and MEI - Macro Economic Framework, Macroeconomics.
Introduction of Relation between MEC and MEI - Macro Economic Framework, Macroeconomics in English is available as part of our Macro Economics
for B Com & Relation between MEC and MEI - Macro Economic Framework, Macroeconomics in Hindi for Macro Economics course.
Download more important topics related with notes, lectures and mock test series for B Com
Exam by signing up for free. B Com: Relation between MEC and MEI - Macro Economic Framework, Macroeconomics | Macro Economics - B Com
Description
Full syllabus notes, lecture & questions for Relation between MEC and MEI - Macro Economic Framework, Macroeconomics | Macro Economics - B Com - B Com | Plus excerises question with solution to help you revise complete syllabus for Macro Economics | Best notes, free PDF download
Information about Relation between MEC and MEI - Macro Economic Framework, Macroeconomics
In this doc you can find the meaning of Relation between MEC and MEI - Macro Economic Framework, Macroeconomics defined & explained in the simplest way possible. Besides explaining types of
Relation between MEC and MEI - Macro Economic Framework, Macroeconomics theory, EduRev gives you an ample number of questions to practice Relation between MEC and MEI - Macro Economic Framework, Macroeconomics tests, examples and also practice B Com
tests
|
Explore Courses for B Com exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
Related Searches
shortcuts and tricks
,Macroeconomics | Macro Economics - B Com
,Macroeconomics | Macro Economics - B Com
,practice quizzes
,MCQs
,Semester Notes
,ppt
,Relation between MEC and MEI - Macro Economic Framework
,study material
,Relation between MEC and MEI - Macro Economic Framework
,Extra Questions
,Relation between MEC and MEI - Macro Economic Framework
,Viva Questions
,past year papers
,Sample Paper
,Previous Year Questions with Solutions
,Objective type Questions
,Macroeconomics | Macro Economics - B Com
,video lectures
,Summary
,mock tests for examination
,Free
,Exam
,Important questions
;
Additional Information about Relation between MEC and MEI - Macro Economic Framework, Macroeconomics for B Com Preparation
Relation between MEC and MEI - Macro Economic Framework, Macroeconomics Free PDF Download
The Relation between MEC and MEI - Macro Economic Framework, Macroeconomics is an invaluable resource that delves deep into the core of the B Com exam.
These study notes are curated by experts and cover all the essential topics and concepts, making your preparation more efficient and effective.
With the help of these notes, you can grasp complex subjects quickly, revise important points easily,
and reinforce your understanding of key concepts. The study notes are presented in a concise and easy-to-understand manner,
allowing you to optimize your learning process. Whether you're looking for best-recommended books, sample papers, study material,
or toppers' notes, this PDF has got you covered. Download the Relation between MEC and MEI - Macro Economic Framework, Macroeconomics now and kickstart your journey towards success in the B Com exam.
Importance of Relation between MEC and MEI - Macro Economic Framework, Macroeconomics
The importance of Relation between MEC and MEI - Macro Economic Framework, Macroeconomics cannot be overstated, especially for B Com aspirants.
This document holds the key to success in the B Com exam.
It offers a detailed understanding of the concept, providing invaluable insights into the topic.
By knowing the concepts well in advance, students can plan their preparation effectively.
Utilize this indispensable guide for a well-rounded preparation and achieve your desired results.
Relation between MEC and MEI - Macro Economic Framework, Macroeconomics Notes
Relation between MEC and MEI - Macro Economic Framework, Macroeconomics Notes offer in-depth insights into the specific topic to help you master it with ease.
This comprehensive document covers all aspects related to Relation between MEC and MEI - Macro Economic Framework, Macroeconomics.
It includes detailed information about the exam syllabus, recommended books, and study materials for a well-rounded preparation.
Practice papers and question papers enable you to assess your progress effectively.
Additionally, the paper analysis provides valuable tips for tackling the exam strategically.
Access to Toppers' notes gives you an edge in understanding complex concepts.
Whether you're a beginner or aiming for advanced proficiency, Relation between MEC and MEI - Macro Economic Framework, Macroeconomics Notes on EduRev are your ultimate resource for success.
Relation between MEC and MEI - Macro Economic Framework, Macroeconomics B Com Questions
The "Relation between MEC and MEI - Macro Economic Framework, Macroeconomics B Com Questions" guide is a valuable resource for all aspiring students preparing for the
B Com exam. It focuses on providing a wide range of practice questions to help students gauge
their understanding of the exam topics. These questions cover the entire syllabus, ensuring comprehensive preparation.
The guide includes previous years' question papers for students to familiarize themselves with the exam's format and difficulty level.
Additionally, it offers subject-specific question banks, allowing students to focus on weak areas and improve their performance.
Study Relation between MEC and MEI - Macro Economic Framework, Macroeconomics on the App
Students of B Com can study Relation between MEC and MEI - Macro Economic Framework, Macroeconomics alongwith tests & analysis from the EduRev app,
which will help them while preparing for their exam. Apart from the Relation between MEC and MEI - Macro Economic Framework, Macroeconomics,
students can also utilize the EduRev App for other study materials such as previous year question papers, syllabus, important questions, etc.
The EduRev App will make your learning easier as you can access it from anywhere you want.
The content of Relation between MEC and MEI - Macro Economic Framework, Macroeconomics is prepared as per the latest B Com syllabus.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup