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| Q. |
Gresham's law is related to - |
| A. | Consumption and demand |
| B. | Supply and demand |
| C. | Circulation of money |
| D. | Deficit financing |
| Answer» C. Circulation of money | |
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Explanation: Gresham's law is an observation in economics that "bad money drives out good." More exactly, if coins containing metal of different value have the same value as legal tender, the coins composed of the cheaper metal will be used for payment, while those made of more expensive metal will be hoarded or exported and thus tend to disappear from circulation. Sir Thomas Gresham, financial agent of Queen Elizabeth I, was not the first to recognize this monetary principle, but his elucidation of it in 1558 prompted the economist H.D. Macleod to suggest the term Gresham's law in the 19th century. |
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