Long-term interest rates are higher than short-term rates. This reflects a belief that:
A) short-term rates will fall.
B) short-term rates will rise.
C) short-term rates will remain the same.
D) the Federal Reserve is undergoing a change in policy.

Question

Quizplus · Accepted Answer

When long-term interest rates are higher than short-term rates, it is known as an upward sloping yield curve. This typically reflects a belief that short-term rates will rise in the future, leading to higher overall borrowing costs. This can be caused by a variety of factors such as inflation expectations, economic growth projections, and changes in monetary policy.

Long-Term Interest Rates Are Higher Than Short-Term Rates