Final answer:
M1 includes currency, demand deposits (checkable deposits), and traveler's checks (option c). Traveler's checks are part of M1 but are less commonly used now. M2 expands on M1 by including savings and time deposits, certificates of deposit, and money market funds.
Step-by-step explanation:
The components of money that we count as part of M1 include currency (coins and bills in circulation), demand deposits (checkable deposits), and traveler's checks. Demand deposits are the amounts held in checking accounts and are accessible on demand by the account holder. Traveler's checks are also counted in M1, although their use has been declining. Thus, the correct answer to what components of money are counted as part of M1 is c) Currency, demand deposits, and traveler's checks.
It is important to understand that M1 is a category of the money supply that represents the most liquid forms of monetary assets. M2 includes everything in M1 plus additional forms of savings, such as savings deposits, time deposits like certificates of deposit, and money market funds.