Final answer:
Paper money first appeared in China in the 10th century AD, during the Northern Song Dynasty. Issuing more paper money than could be redeemed in metal or silk caused inflation but facilitated commerce and taxation.
Step-by-step explanation:
Paper money possibly first appeared in China in the 10th century AD. The use of paper currency in Yuan China was a significant development in the history of commerce. While paper money was intended to be convertible to metal or silk, the government issued more paper money than it could redeem, leading to inflation. Kublai Khan's decree made paper money necessary for transactions with the government. This historical economic policy highlights how paper money entered circulation and became essential for everyday transactions and paying taxes. Paper money continued to evolve over the centuries and became a standard form of currency around the world.
The Evolution of Paper Money in China
During the Northern Song Dynasty, significant technological advances took place, including the first use of paper money, which was printed with copper metal type. This innovation in currency predates the European use of printed money by several centuries. Bi Sheng's invention of moveable type around 1040 CE played a crucial role in the mass production of paper currency in China.