A negatively sloped yield curve indicates that the economy
A) is likely to show strong growth in the coming months.
B) will not change noticeably in the coming months.
C) is likely to show significant weakness in the coming months.
D) None of the above.

Question

Quizplus · Accepted Answer

A negatively sloped yield curve, also known as an inverted yield curve, suggests that investors have less faith in the long-term outlook for the economy. This is because investors demand higher yields for shorter-term bonds due to uncertainty about the economy's future performance. In contrast, long-term bonds offer lower yields as investors expect weaker growth and lower inflation in the long run. Therefore, an inverted yield curve is often seen as a predictor of an upcoming economic recession or slowdown.

A Negatively Sloped Yield Curve Indicates That the Economy