When the yield curve is downward sloping:
A) People are expecting an economic slowdown
B) Short-term yields are lower than long term yields
C) People are expecting higher inflation in the future
D) People could be expecting a tightening in monetary policy

Question

Quizplus · Accepted Answer

D  A downward sloping yield curve, also known as an inverted yield curve, often indicates that investors expect an economic slowdown or recession. It can also suggest that people expect a tightening in monetary policy, as short-term interest rates may rise relative to long-term rates.

When the Yield Curve Is Downward Sloping