How do trends in bond interest rates help predict changes in the business cycle?
A) When long-term rates are higher than short-term rates, a recession is likely.
B) When long-term rates are lower than short-term rates, a recession is likely.
C) When long-term rates are higher than short-term rates, a trough is present.
D) When long-term rates are lower than short-term rates, an expansion is likely.

Question

Quizplus · Accepted Answer

Inverted yield curves, where long-term rates are lower than short-term rates, have historically been a reliable predictor of an upcoming recession.

How Do Trends in Bond Interest Rates Help Predict Changes