Answer
Currency and checkable deposits are the components of M1 money supply. Currency is coins and paper money that is in the hands of the public. Checkable deposits are all deposits in commercial bank and "thrift" or savings institutions on which checks of any size can be drawn. The currency is the largest component because 51 percent of the M1 money supply that is used by the public comes from bills and coins. Bills and coins are also legal tender. The face of a coin is greater than its intrinsic value so that people can melt coins and sell the material they are made out of for more that the monetary value of the coin itself. Savings deposits, time deposits, and Money market mutual funds held by individuals are near monies included in the M1 money supply. Savings deposits are deposits that are interest-bearing and that the depositor can normally withdraw at any time. Time deposits are interest-earning deposits in a commercial bank or thrift institution that the depositor can withdraw without penalty after the end of a specified period. Money market mutual funds held by individuals are interest bearing accounts offered by investment companies, which pool depositors' funds for the purchase of short-term securities. Depositors can write checks in minimum amounts, or more against their accounts.
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