Which of the following is NOT included in the M1 money supply as currency held by?

• A. The public
• B. Businesses
• C. Households
• D. Commercial banks

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the definition of M1 money supply. M1 includes the most liquid forms of money, such as currency held by the public, demand deposits, traveler's checks, and other checkable deposits.
2. Step 2: Identify who counts as 'the public' in the context of M1. This generally includes households and businesses, as they hold currency and demand deposits that are part of M1.
3. Step 3: Recognize that commercial banks themselves do not count the currency they hold as part of M1 because M1 measures money held by the public outside the banking system.
4. Step 4: Recall that currency held by commercial banks is considered part of the bank's reserves and is not included in M1 since it is not in circulation among the public.
5. Step 5: Conclude that among the options, commercial banks are the correct answer because currency held by them is excluded from the M1 money supply.