The Incremental Capital-Output Ratio (ICOR) is used to measure:
- The marginal efficiency of capital
- The efficiency of investment in generating additional output
- The depreciation rate of capital assets
- The ratio of foreign to domestic capital
Answer: The efficiency of investment in generating additional output
ICOR indicates how much additional capital is needed to produce one additional unit of output. A lower ICOR signifies high efficiency and productivity of investments, whereas a high ICOR indicates inefficiency, poor infrastructure, or technological bottlenecks in the economy.