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Definition of 'Denomination'

A denomination is a unit of currency. It is the value of a coin or banknote. The most common denominations are 1, 5, 10, 20, 50, and 100. However, there are also denominations of 2, 25, 100, 500, and 1000. The value of a denomination is determined by the government that issues it.

Denominations are important because they allow for the easy exchange of goods and services. For example, if you want to buy a loaf of bread that costs $2, you can give the cashier two $1 bills. If you want to buy a car that costs $20,000, you can give the dealer 20 $100 bills.

Denominations are also important for international trade. When businesses trade with each other, they often use different currencies. Denominations make it possible to convert one currency into another. For example, if a British company wants to buy a product from a Japanese company, the British company can convert its pounds into yen.

Denominations can also be used to store value. For example, if you want to save up for a down payment on a house, you can put your money in a savings account. The savings account will pay you interest, which will increase the value of your savings.

Denominations are an important part of the financial system. They allow for the easy exchange of goods and services, international trade, and saving.

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