Let us start with a small bit of factual information. And then we can build our word meaning from this little nugget.

We have at some point of time read or heard about things such as a 22 or 25 caliber guns. What does this word caliber doing here? In guns and firearms, caliber or caliber is defined as the approximate diameter of the gun barrel. If we apply a bit of our resplendent common sense, we realize that higher the caliber, higher the potency of the arm (as the size of loaded gunpowder would increase proportionally).

The best part is that the word caliber/calibre ,as it is used today, is not limited to guns. In fact, more often than not, it is used to describe the ability of particular person or thing. For example, we can say: the employee hired by us this month has turned out to be of extremely low caliber/calibre.

The dictionary definitions for caliber are as follows:
1. Abbreviation. cal.
a. The diameter of the inside of a round cylinder, such as a tube. (noun)
b. The diameter of the bore of a firearm, usually shown in hundredths or thousandths of an inch and expressed in writing or print in terms of a decimal fraction: .45 caliber. (noun)
c. The diameter of a large projectile, such as an artillery shell, measured in millimeters or in inches. (noun)
2. Degree of worth; quality: a college of high caliber; an employee of low caliber. (noun)

Masters Tip to remember Caliber:

Just remember the tip of gun and the damage it can. You surely do not want to fight such caliber/calibre.

Usage examples for caliber:
1. Finding people with the right calibre/caliber and to slot them at the right place is a very tough job for the HR manager.
2. It is probable that television drama of high caliber and produced by first-rate artists will materially raise the level of dramatic taste of the nation. -David Sarnoff

Footnotes:
1. The facts with respect to guns expressed in this article are just pieces of information useful to us. Gun calibers have a lot more to them and you would do well to read about them on Wikipedia.
2. Caliber is the spelling common in the US and Calibre is the spelling according to the British system.

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