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A medium of exchange allowing goods and services to be valued in terms of a legal tender consisting of objects with a high intrinsic value (gold) or a token value (banknotes), rather than traded directly as would occur in a barter economy. Coins of fixed values issued by a government first appeared in the 8th century bc both in Lydia, in Asia Minor, and in China. Britain's first coins, of silver and copper, appeared in the 1st century bc. Thereafter until recently most coins have been made of gold and silver, with copper and bronze used for coins of low value. Token money (such as banknotes) has an intrinsic value less than its face value. Banknotes were first issued by banks who undertook to pay the sum of money that appeared on the note from their deposits of gold. The Bank of England issued notes from its foundation in 1694 and banknotes are now the principal form of money in circulation.

Subjects: History.

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