Investopedia

Continue to Site »

Gresham's Law

Filed Under » , ,
Dictionary Says

Definition of 'Gresham's Law'

A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new coin ("bad money") is assigned the same face value as an older coin containing a higher amount of precious metal ("good money"), then the new coin will be used in circulation while the old coin will be hoarded and will disappear from circulation.
Investopedia Says

Investopedia explains 'Gresham's Law'

Coins were first made with gold, silver and other precious metals, which gave them their value. Over time, the amount of precious metals used to make the coin decreased because the metals were worth more on their own than when minted into the coin itself. If the value of the metal in the old coins was higher than the coin's face value, people would melt the coins down and sell the metal. Similarly, if a low quality good is passed off as a high quality good, then the market will drive down prices because consumers won't be able to determine the good's real value.

Articles Of Interest

  1.

    The Evolution Of Banking

    Banks are a part of ancient history. Find out how this system of money management developed into what we know today.

  2. What Is the Quantity Theory of Money?

    Take a look at the tenets, assumptions and challenges of monetarism's principal theory.

  3. The History Of Money: From Barter To Banknotes

    Money has been a part of human history for at least 3,000 years. Learn how it evolved.

  4. 5 ETFs Flaws You Shouldn't Overlook

    Despite their popularity, exchange traded funds have some drawbacks that investors should know about.

  5. Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!

  6. Liquidity Vs. Solvency

    Learn about the differences between these two words and how each one is used in the stock market.

  7. Should You Invest Your Entire Portfolio In Stocks?

    It is true that stocks outperform bonds and cash in the long run, but that statistic doesn't tell the whole story.

  8. The Uses And Limits Of Volatility

    Check out how the assumptions of theoretical risk models compare to actual market performance.

  9. R-Squared

    Learn more about this statistical measurement used to represent movement between a security and its benchmark.

  10. Risk Tolerance Only Tells Half The Story

    Just because you're willing to accept a risk, doesn't mean you always should.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  2. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  3. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  4. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  5. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  6. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.
Trading Center
Array ( )
taggroups(for debug only):
Array ( [0] => Investing [1] => SEG (Investors) [3] => Personal Finance [6] => Financial Theory ) time:10ms