# 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 ---