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A bank's GAP analysis measures the sensitivity of its assets and liabilities to changes in interest rates. A positive cumulative GAP occurs when the amount of rate-sensitive assets exceeds the amount of rate-sensitive liabilities over a particular time frame. This situation indicates that the bank stands to benefit from increases in interest rates, as it has more assets that can earn higher rates compared to its liabilities that may be paying out lower rates.

When assets are greater than liabilities, it implies that the bank has a favorable position to increase its interest earnings. This enables the bank to potentially enhance its profitability in a rising interest rate environment. Hence, having more rate-sensitive assets than liabilities (positive cumulative GAP) can be advantageous for a bank, allowing it to maximize earnings on its asset base while minimizing the cost of its liabilities.

In contrast, if liabilities are greater than assets, the bank may experience disadvantages in an increasing interest rate environment. Similarly, equal sensitivity between assets and liabilities would result in no significant gain or loss from interest rate changes. Additionally, the state of the economy, such as a recession, typically influences interest rates but does not directly affect the conditions under which a positive cumulative GAP is indicated. Thus, the condition where a bank's assets exceed its liabilities confirms the reasoning for a