Gresham's law


Gresh·am's law

noun \ˈgre-shəmz-\

Definition of GRESHAM'S LAW

:  an observation in economics: when two coins are equal in debt-paying value but unequal in intrinsic value, the one having the lesser intrinsic value tends to remain in circulation and the other to be hoarded or exported as bullion; broadly :  any process by which inferior products or practices drive out superior ones

Origin of GRESHAM'S LAW

Sir Thomas Gresham
First Known Use: 1858

Gresham's law

noun    (Concise Encyclopedia)

Observation that “bad money drives out good.” It is named for Sir Thomas Gresham (1519–1579), financial agent of Queen Elizabeth I, who was one of the first to elucidate it (he had been preceded by Copernicus). The meaning expressed is that, if two coins have the same face value but are made from metals of unequal value, the cheaper will tend to drive the other out of circulation; the more valuable coin will be hoarded or used for foreign exchange instead of for domestic transactions.

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