Final answer:
A drawdown decreases the supply of cash available to the direct clearers while a redeposit increases it. The central bank influences the cash supply by buying (increasing) or selling (decreasing) bonds, and banks impact cash supply through loan creation.
Step-by-step explanation:
A drawdown decreases the supply of cash available to the direct clearers while a redeposit increases it. When a central bank buys bonds, it results in an increase in the money supply because cash flows from the central bank to individual banks. This deposit into banks’ reserves can then be used for creating more loans, effectively increasing the supply of cash. Conversely, when the central bank sells bonds, cash from the individual banks flows into the central bank, resulting in a decrease in overall cash supply as the banks' reserves deplete. Banks may also alter their cash position by making loans. If a bank loans out money to its customers, these funds typically get redeposited into other accounts within the banking system, thus increasing the cash supply as long as this new money is lent out repeatedly. On the other hand, if banks decide to drawdown loans by not issuing new loans and redirecting funds to their reserves, this will result in a lesser amount of cash circulating in the economy.