The-definition.com

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.

Share it:  Cite

More from this Section

  • Inflation targeting
    Inflation targeting is a monetary policy strategy to achieve price stability. ...
  • Managers of Bank Operations
    Managers in the operations division of a bank are responsible for maintaining and improving ...
  • Sight Bill
    Sight Bill is a Bill of Exchange payable at sight is treated as being payable by the drawee ...
  • National reciprocity
    National reciprocity is a state law that allows banks or bank holding ...
  • Away from us
    Away from us used in context of general equities, to characterize role of a competing ...