<!-- generated: provider=openrouter model=arcee-ai/trinity-large-preview:free date=2026-02-19 source=book-2-chapter-02 -->

# Bank Notes

## Definition

Paper currency issued by banks that circulates as money based on public confidence in the issuing institution. These notes are payable on demand and can replace gold and silver in many transactions.

## Source Chapter

Book II, Chapter 2

## Context

Smith discusses bank notes as the primary form of paper money, explaining how they can circulate at par with gold and silver when issued by reputable banks. He analyses their role in reducing the quantity of precious metals needed for circulation.

## Economic Domain

Exchange

---
