As GDP rises the:
A) Risk spread and term spread decrease
B) Risk spread and term spread increase
C) Risk spread increases and the term spread decreases
D) Risk spread decreases and the term spread increases

Question

Quizplus · Accepted Answer

When GDP rises, there is generally a decrease in risk spread and an increase in the term spread. The lower risk spread indicates an increase in investor confidence while the higher term spread indicates that investors expect higher interest rates in the future due to the growing economy. Therefore, choice D correctly reflects these trends.

As GDP Rises The