For which of the following situations would the yield curve most likely predict that a recession will occur?
A) short-term interest rate = 2%; long-term interest rate = 4%
B) short-term interest rate = 0%; long-term interest rate = 5%
C) short-term interest rate = 3%; long-term interest rate = 3%
D) short-term interest rate = 4%; long-term interest rate = 3%

Question

Quizplus · Accepted Answer

An inverted yield curve, where short-term rates are higher than long-term rates, often predicts a recession. In option D, the short-term rate is higher than the long-term rate, indicating an inverted yield curve.

For Which of the Following Situations Would the Yield Curve