What are the factors affecting investment in an economy ? Explain.

1.	What are the factors affecting investment in an economy ? Explain.
Answer» 1. Marginal efficiency of capital : Demand of investment is low on high rate of interest and vice-versa. Thus, the MEC curve has a negative slope. 2. Rate of Interest : When the rate of interest is high, it increases the cost of capital, and thus, investment declines.

Answer»

1. Marginal efficiency of capital : Demand of investment is low on high rate of interest and vice-versa. Thus, the MEC curve has a negative slope.

2. Rate of Interest : When the rate of interest is high, it increases the cost of capital, and thus, investment declines.

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What are the factors affecting investment in an economy ? Explain.

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