The correct answer is C. Non-convertible paper money.
Gresham’s law states that “bad money drives out good.” In other words, when two forms of money are in circulation, the form of money with lower intrinsic
value will tend to drive out the form with higher intrinsic value. This is because people will tend to hoard the form of money with higher intrinsic value and use the form of money with lower intrinsic value for transactions.Representative paper money is a type of paper money that is backed by a commodity, such as gold or silver. Convertible paper money is a type of paper money that can be redeemed for a commodity, such as gold or silver. Fiat money is a type of paper money that is not backed
by a commodity.Non-convertible paper money is the worst type of money according to Gresham’s law because it has the lowest intrinsic value. People will tend to hoard the form of money with higher intrinsic value, such as representative paper money or convertible paper money, and use the form of money with lower intrinsic value, such as non-convertible paper money, for transactions. This will cause the value of non-convertible paper money to decrease, which will make it even less desirable to hold.
Here is a table that summarizes the different types of money and their intrinsic values:
| Type of money | Intrinsic value |
| — | — |
| Representative paper money | Value of the commodity it is backed by |
| Convertible paper money | Value of the commodity it can be redeemed for |
| Fiat money | No intrinsic value |
As you can see, non-convertible paper money has the lowest intrinsic value of all the types of money. This is why it is the worst type of money according to Gresham’s law.