According to the expectations hypothesis,a(n)________ yield curve reflects lower expected future rates of interest.

Question

Quizplus · Accepted Answer

According to the expectations hypothesis, a downward-sloping yield curve reflects lower expected future rates of interest. This is because investors are willing to buy longer-term bonds at lower yields if they believe that short-term rates are going to decline in the future. As a result, longer-term bond prices rise, pushing their yields down, and creating a downward-sloping yield curve.

According to the Expectations Hypothesis,a(n)________ Yield Curve Reflects Lower Expected