Q.Lower interest rates are likely to :

The concept of Marginal Efficiency of Capital was introduced by J.M. Keynes, so option (d) is correct.

MEC (Marginal Efficiency of Capital) is the expected rate of return on an additional unit of capital investment. It was introduced by J.M. Keynes in his General Theory. Investment is undertaken as long as the MEC is greater than or equal to the rate of interest, so MEC is a key determinant of th …

Lower interest rates increase borrowing and spending.

The rate of interest is the price paid to borrow money. When interest rates fall:

• Loans become cheaper, so households borrow more for consumption (cars, homes, durables) and firms borrow more for investment.
• Saving becomes less attractive because the return on savings falls, so people prefer to spend.
• Overall, aggregate demand rises. …