Final answer:
A piece of paper filled in by merchants to conduct trades without gold or silver was called a bill of exchange. This aided in reducing the risks of transporting precious metals and was part of the historical evolution from bartering to commodity money and eventually to paper and fiat currencies.
Step-by-step explanation:
Historically, when merchants bought goods, instead of paying for them with gold or silver, they simply filled in a piece of paper called a bill of exchange which ordered the goldsmith or silversmith to give a certain amount of the precious metal to the person who sold the goods. This instrument allowed merchants to trade without the immediate transfer of physical currency, facilitating commerce and reducing the risk of transporting gold and silver over long distances.
In the context of the United States' history, during times such as the War of 1812 and thereafter, the practice of issuing paper currency became more prevalent. Even after the war, banks continued to issue banknotes without the equivalent in specie, relying on the public's trust in the paper money's value. Silver certificates, used well into the 20th century, signified that the bearer could exchange such a note for a specific amount of silver, indicating that, historically, paper money often had commodity backing.The development of monetary systems advanced from bartering to the use of commodity money, like gold and silver, and eventually to paper money and fiat currencies which hold value by government decree and the public's trust, rather than being backed by a physical commodity.