When the yield curve is flat or downward-sloping,it suggest that the economy is more likely to enter
A)a recession.
B)an expansion.
C)a boom time.
D)a period of increasing output.

Question

Quizplus · Accepted Answer

A flat or downward-sloping yield curve indicates that short-term interest rates are relatively high compared to long-term rates. This suggests that investors have a pessimistic outlook for the future of the economy and anticipate that the central bank will need to lower short-term rates in response to weak economic growth or a potential recession. Therefore, it is more likely that the economy will enter a recession when the yield curve is flat or downward-sloping.

When the Yield Curve Is Flat or Downward-Sloping,it Suggest That