Final answer:
No, counterfeit coins are not counted in the currency supply and do not form a part of either M1 or M2 money classifications because they do not have legal tender status and are not accepted as legitimate forms of money.
Step-by-step explanation:
Counterfeit coins are not counted in the currency supply of a country. Whether we refer to the components that make up M1 (which includes currency and checks that are easiest to spend) or those that constitute M2 (which includes M1 along with savings accounts, time deposits, and other forms of near-money), counterfeit coins do not qualify as they are illegal and are not recognized as legitimate forms of money.
M1 is a classification of money that includes the most liquid forms of monetary assets, such as physical currency and demand deposits. On the other hand, M2 is a broader classification that includes all of M1 plus less liquid forms of money, like savings accounts and time deposits. Neither classification includes counterfeit coins because they do not have any legal tender status and are not recognized by financial institutions.
Just as casino chips are not considered money outside the casino walls, counterfeit coins cannot be legally exchanged for goods and services, nor are they accepted as a form of payment outside of any fraudulent context. They are not a medium of exchange, unit of account, or store of value in any legal sense.