Refer to the diagram, where T is tax revenues and G is government expenditures. All figures are in billions of dollars. If the full-employment GDP is $400 billion while the actual GDP is $200 billion, the cyclically adjusted budget deficit is:

If a bank has more rate-sensitive assets than rate-sensitive liabilities

A) it reduces interest rate risk by swapping rate-sensitive income for fixed rate income. B) it reduces interest rate risk by swapping fixed rate income for rate-sensitive income. C) it increases interest rate risk by swapping rate-sensitive income for fixed rate income. D) it neutralizes interest rate risk by receiving and paying fixed-rate streams.

Having more relevant instruments

A) is a problem because instead of being just identified, the regression now becomes overidentified. B) is like having a larger sample size in that the more information is available for use in the IV regressions. C) typically results in larger standard errors for the TSLS estimator. D) is not as important for inference as having the same number of endogenous variables as instruments.