Final answer:
Currency held outside banks is part of both M1 and M2 money supply. However, money market accounts are included in M2 and are not part of M1. M1 consists of liquid assets such as cash in circulation and checkable deposits, whereas M2 includes these plus other slightly less liquid assets.
Step-by-step explanation:
The question revolves around the concept of money supply in the United States, which is categorized into different levels: M1 and M2. To address which element is included in M2 but not in M1, we need to understand that M1 money supply includes all coins and currency in circulation, demand deposits (checkable deposits), and other liquid assets like traveler's checks. However, M1 does not include other types of accounts that are slightly less liquid, such as savings accounts, money market accounts, and other time deposits, which are in fact included in M2 money supply.
The answer to the question is that currency held outside banks is actually a part of both M1 and M2, as it represents cash in circulation among the public. The element included in M2 but not in M1 would be money market accounts, which are types of accounts that offer higher interest rates and typically require higher minimum balances than regular savings accounts.