What is a bank note?

A bank note is a piece of paper money issued by a central bank, which serves as a legal tender for transactions within the economy. It represents a promise by the issuing bank to pay the bearer the face value of the note upon demand. Bank notes are typically used for everyday transactions and are recognized for their value due to the backing of the government and the central banking authority that issues them.

In contrast to the other options, a bank note specifically refers to physical currency that circulates in the economy, distinguishing it from digital forms of money or deposits which may not represent cash in hand. Interest-bearing deposits refer to accounts where money earns interest, and savings bonds are a fixed-income investment issued by governments. These do not share the same qualities or functions as a bank note, which is fundamentally a medium of exchange.