Which of the following statements is most correct?
A) A downward sloping yield curve implies that government securities with long-term maturities have lower interest rates relative to similar quality securities with short-term maturities.
B) Commercial paper is a primary source of short-term borrowing used by the U.S. government.
C) A decline in interest rates for long-term Treasury securities indicates an increase in investor long-run inflation expectations.
D) The establishment of the Federal Reserve System has caused the yield curve to always be upward sloping.

Question

Quizplus · Accepted Answer

A downward sloping yield curve indicates that long-term government securities have lower interest rates than short-term securities of similar quality. The opposite is true for an upward sloping yield curve. 
B, C, and D are incorrect statements.

Which of the Following Statements Is Most Correct