Matthew Olson, age 17, of Freeport, I11., for his question:

WHAT IS GRESHAM'S LAW?

Greshman's Law states the principle that "bad money tends to drive good money out of circulation." The law is named after Sir Thomas Gresham (1519 1579), founder of the Royal Exchange in London.

But Gresham was not the first to notice the obvious fact that if a man had two gold coins of the same face value, and one of them is heavier, he will probably save the heavy one and spend the lighter  one.

As early as the 1200s, dishonest dealers shaved the edges of gold coins. Those who received these lightweight coins would usually pass them along as soon as possible, and keep the full weight coins as long as they could.

Gresham stated this principle  Where by legal enactment a government assigns the same nominal value to two or more forms of circulatory medium whose intrinsic values differ, payments will be made in that medium of which the cost of production is least, the more valuable medium tending to disappear from circulation.