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# Paper Money

## Definition

Promissory notes issued by banks and bankers that serve as a substitute for gold and silver money in circulation. These notes are accepted as currency because of confidence that they can be exchanged for metal money on demand.

## Source Chapter

Book II, Chapter 2

## Context

Smith discusses paper money as a less expensive instrument of commerce that can replace gold and silver in circulation. He explains how paper money can reduce the expense of maintaining a country's circulating medium while still facilitating the same quantity of exchanges.

## Economic Domain

Exchange

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