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Legal Definitions - paper money
Simple Definition of paper money
Paper money refers to a form of currency, typically made of paper or a similar material, that serves as a medium of exchange and a store of value. It is usually issued by a government or central bank and is recognized as legal tender within a jurisdiction.
Definition of paper money
Paper money refers to physical currency, typically made from paper or a durable polymer, that is issued by a government or central bank and serves as a recognized medium of exchange. Unlike commodity money (which has intrinsic value, like gold coins), paper money's value is derived from government decree and public trust in the issuing authority. It represents a promise by the government to honor its value and is accepted for transactions because of this backing.
Example 1: Sarah purchases a new book at a local bookstore. She hands the cashier a $20 bill to pay for her purchase.
Explanation: The $20 bill is an example of paper money. It is a physical note issued by the U.S. government that Sarah uses as a universally accepted medium of exchange to acquire goods, demonstrating its function in everyday transactions.
Example 2: A tourist from Europe arrives in Japan and goes to a currency exchange counter to convert their Euros into Japanese Yen. They receive a stack of Japanese Yen banknotes in various denominations.
Explanation: The Japanese Yen banknotes are a form of paper money issued by the Bank of Japan. This example illustrates how different nations issue their own distinct forms of paper money, which can be exchanged for other currencies based on their respective values in the global market.
Example 3: A small business owner receives payment from a customer in the form of several $50 bills for services rendered. The owner then deposits this cash into their business bank account.
Explanation: The $50 bills represent paper money used as a direct payment for services. The act of depositing them into a bank account further highlights their role as a recognized store of value and a transferable asset within the financial system.