Definition

Gresham law

Sir Thomas popularly known as Gresham was the master of mint, during Queen Elizabeth the 1st.

Statement of the law:”Bad money derives good money out of circulation” - Gresham.

 

Queen Elizabeth-1 has issued now gold coin with same monetary value along with the old money circulated during her father’s rule. But there has been a growing phenomenon that the now coins have been driven out of the market and the old coin was in circulation. Queen Elizabeth appointed Gresham to find out the reason. He found that the now gold coin despite pervading the same monetary value alike the old coin but was heavier than the old coins because of clipping. Thus people found old coins profitable using them for monetary purpose and the new coins profitable for use in non-monetary purpose.

Because being new coin is heavier their Monetary value< Non Monetary Value if used as commodity.

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