Use the following figure to answer the question :

-The steeply upward sloping yield curve in the figure above indicates that
A)short-term interest rates are expected to rise in the future.
B)short-term interest rates are expected to fall moderately in the future.
C)short-term interest rates are expected to fall sharply in the future.
D)short-term interest rates are expected to remain unchanged in the future.

Question

Use the following figure to answer the question :

-The steeply upward sloping yield curve in the figure above indicates that
A)short-term interest rates are expected to rise in the future. 
B)short-term interest rates are expected to fall moderately in the future. 
C)short-term interest rates are expected to fall sharply in the future. 
D)short-term interest rates are expected to remain unchanged in the future.

Quizplus · Accepted Answer

The steeply upward sloping yield curve indicates that short-term interest rates are expected to rise in the future. This is because investors require higher yields for longer-term bonds to compensate for the additional risk they take on by holding these securities. This is typically a sign of a growing economy and expectations of rising inflation.

Use the Following Figure to Answer the Question