This statement: "small-denomination time deposits are" included in the definition of both m1 and m2 is FALSE.
Small-denomination time deposits are included in the definition of M2 and M3.
M1, M2, M3 are all different measures of money supply/
M1 refers to coins and notes in circulation and other money equivalents that are easily convertible into cash. This is called narrow money.
M2 refers to M1 and short-term time deposits in banks and 24-hour money market funds.
M3 refers to M2 and long-term time deposits and money market funds with more than 24-hour maturity.
Thus, small-denomination time deposit are classified under M2 and M3.