An increase in the real rate of interest will cause the slope of the term structure of interest rates to increase.

Question

Quizplus · Accepted Answer

An increase in the real rate of interest does not necessarily cause the slope of the term structure of interest rates to increase. The slope of the term structure (yield curve) is influenced by expectations of future interest rates, inflation expectations, and the demand for and supply of bonds of different maturities, not just the real interest rate.

An Increase in the Real Rate of Interest Will Cause