When the yield curve is upward sloping, 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) Long-term yields to be higher than short-term yields

Question

Quizplus · Accepted Answer

An upward sloping yield curve indicates that long-term yields (such as 10-year Treasury bonds) are higher than short-term yields (such as 2-year Treasury notes). This suggests that investors are expecting higher inflation and economic growth in the future, which would require higher long-term yields to compensate for the increased risk. An upward sloping yield curve is generally a positive indicator for the economy, as it suggests that investors are optimistic about future growth prospects.

When the Yield Curve Is Upward Sloping, People Are Expecting