When the yield curve slope is more upward sloping than usual, people are expecting:
A) an economic slowdown.
B) the U.S. Treasury may default on its obligations.
C) the Federal Reserve is going to ease monetary policy.
D) a future rise in short-term interest rates.

Question

Quizplus · Accepted Answer

An upward sloping yield curve indicates that longer-term interest rates are higher than short-term interest rates. This suggests that investors expect short-term interest rates to rise in the future. As a result, the best choice is D – a future rise in short-term interest rates.

When the Yield Curve Slope Is More Upward Sloping Than