Why is Scandinavia called Scandinavia?

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The origin of the word is not entirely clear but people generally favor the idea that it means the island of darkness or fog island. Reasoning: The Norwegian word skodde means fog and avia means island in Norwegian. On old maps, Scandinavia is often shown as an island, and as people's knowledge of world geography was then quite limited, then this interpretation is likely correct.

For more information about Scandinavia, visit http://goscandinavia.about.com

Avia is not 'island' in Nordic languages, the right word is ø or øy, for which there is no modern English equivalent. The German letter ö is roughly the same.
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