Which of the following is included in M1?

• A. Travelers checks
• B. Savings deposits
• C. Small denomination time deposits
• D. Retail money market mutual funds

Answer: (A)

M1 covers the money that is immediately usable for transactions. Travelers checks fit this, because they are cash-like instruments that can be presented to a seller and accepted as payment with instant value, similar to currency and checking deposits. They are a highly liquid form of money that people can spend directly.

Savings deposits and small-denomination time deposits aren’t included in M1 because they aren’t as readily spendable; withdrawals from these accounts usually involve notice, transfer, or penalties, so they don’t function as immediate media of exchange. Retail money market mutual funds also sit outside M1 because, while they are liquid, they’re not as universally accepted for everyday payments and are classified with broader money measures (as near money) rather than as true money in circulation.