Which of the following economic principles states that 'bad money drives out good money' when two forms of commodity money of unequal intrinsic value circulate simultaneously at equal legal exchange rates?

💡 Solution & Explanation

Gresham's Law posits that bad money drives out good money because individuals prefer to hoard undervalued, higher-intrinsic-value currency while spending overvalued or debased currency for daily transactions. Wagner's Law relates to the historical increase in public sector expenditure relative to economic growth.