Use the following figure to answer the question :
-The mound-shaped yield curve in the figure above indicates that the inflation rate is expected to
A)remain constant in the near-term and fall later on.
B)fall moderately in the near-term and rise later on.
C)rise moderately in the near-term and fall later on.
D)remain unchanged in the near-term and rise later on.

Question

Use the following figure to answer the question : 
-The mound-shaped yield curve in the figure above indicates that the inflation rate is expected to
A)remain constant in the near-term and fall later on. 
B)fall moderately in the near-term and rise later on. 
C)rise moderately in the near-term and fall later on. 
D)remain unchanged in the near-term and rise later on.

Quizplus · Accepted Answer

A mound-shaped yield curve suggests that interest rates (and by implication, inflation rates, since the two often move together) are expected to rise in the near-term but then fall later on. This is because the initial upward slope indicates expectations of increasing rates, while the downward slope that follows suggests expectations of decreasing rates thereafter.

Use the Following Figure to Answer the Question