Your friend Jacob is looking at a steep yield curve and makes an attempt to understand the implications using segmented market theory. He says more information will be needed to make economic predictions, as this type of yield curve could be either good news or bad news. Are his comments about this yield curve, using segmented market theory, true or false?

Question

Quizplus · Accepted Answer

Segmented market theory suggests that the yield curve is determined by the supply and demand for securities within each maturity segment, independently of other segments. Therefore, a steep yield curve under this theory does not inherently predict economic outcomes without additional context or information about specific segments.

Your Friend Jacob Is Looking at a Steep Yield Curve