The United States dollar (sign: $; code: USD; also abbreviated US$), is referred to as the U.S. dollar, or Federal Reserve Note. It is the official currency of the United States and its overseas territories. It is divided into 100 smaller units called cents.
The U.S. dollar is the currency most used in international transactions and is one of the world's most dominant reserve currencies. Several countries use it as their official currency, and in many others it is the de facto currency. It is also used as the sole currency in two British Overseas Territories: the British Virgin Islands and the Turks and Caicos islands.
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given socio-economic context or country. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past, a standard of deferred payment. Any kind of object or secure verifiable record that fulfills these functions can be considered money.
Money is historically an emergent market phenomenon establishing a commodity money, but nearly all contemporary money systems are based on fiat money. Fiat money, like any check or note of debt, is without intrinsic use value as a physical commodity. It derives its value by being declared by a government to be legal tender; that is, it must be accepted as a form of payment within the boundaries of the country, for "all debts, public and private". Such laws in practice cause fiat money to acquire the value of any of the goods and services that it may be traded for within the nation that issues it.
The money supply of a country includes currency (banknotes and coins), and may include bank money (the balance held in checking accounts and savings accounts). Bank money, which consists only of records (mostly computerized in modern banking), forms by far the largest part of broad money in developed nations.
A banknote (often known as a bill, paper money, or simply a note) is a type of negotiable instrument known as a promissory note, made by a bank, payable to the bearer on demand. When banknotes were first introduced, they were, in effect, a promise to pay the bearer in coins, but gradually became a substitute for the coins and a form of money in their own right. Banknotes were originally issued by commercial banks, but since their general acceptance as a form of money, most countries have assigned the responsibility for issuing national banknotes to a central bank. National banknotes are legal tender, meaning that medium of payment is allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Historically, banks sought to ensure that they could always pay customers in coins when they presented banknotes for payment. This practice of "backing" notes with something of substance is the basis for the history of central banks backing their currencies in gold or silver. Today, most national currencies have no backing in precious metals or commodities and have value only by fiat. With the exception of non-circulating high-value or precious metal issues, coins are used for lower valued monetary units, while banknotes are used for higher values.