What ar e two ways a DI can offset the liquidity effects of a net deposit drain of funds? How do the two methods differ? What are the operational benefits and costs of each method? If the DI has a net deposit drain, it needs to either increase its liabilities (by borrowing funds or issuing equity, i.e., purchased liquidity management) or reduce its assets (i.e., stored liquidity management). Inflation may cause a general flight from cash that will cause the distribution to narrow. The entire distribution shifts to the right and may have a positive mean value as withdrawals average more than deposits. The imp act will be to widen the distribution. However, as the opportunity cost of holding mone y declines, some depositors may increase their net deposits. Moreover, the standard deviation decreases as the distribution narrows. The entire distribution shifts to the right (an increase in the ex pected amount of withdrawals) as individuals spend more. How is the DI's distribution pattern of net deposit drains affected by the following? a.
