Final answer:
One major component of money supply M1 is liabilities, because it includes the deposits made by customers at a bank, which the bank owes back to them.
Step-by-step explanation:
One major component of money supply M1 is part of a bank's liabilities. This is because the money supply includes currency in circulation and various types of deposits, and deposits made at a bank are considered liabilities for the bank. Banks owe these deposits back to the customers who have made them. On a bank's balance sheet, these deposits are separated from assets by a "T-account," with liabilities on the right-hand side.
Assets on the other hand include cash in the bank's vault, reserves held at the Federal Reserve, loans made to customers, and bonds. While reserves are a type of asset for a bank, they are not part of M1. It is the customers’ deposits that are directly reflected in the M1 measure of the money supply.
The correct answer is thus C. Liabilities.