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# Discount of Bills

## Definition

The practice of banks advancing money on bills of exchange before they become due, deducting interest for the time remaining. This provides merchants with immediate liquidity while awaiting payment from customers.

## Source Chapter

Book II, Chapter 2

## Context

Smith explains how banks make most of their profits through discounting bills of exchange, advancing money to merchants before their bills become due. He analyses this as a key banking service that facilitates trade.

## Economic Domain

Exchange

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