According to the expectations theory, a negatively sloped yield curve usually reflects
A)an increase in expected income.
B)an increase in expected future prices.
C)a decrease in expected future prices.
D)a decrease in the money supply.

Question

Quizplus · Accepted Answer

According to the expectations theory, a negatively sloped yield curve indicates that investors expect interest rates to decrease in the future. This implies that they expect prices to decrease in the future as well, as lower interest rates usually stimulate economic growth and can lead to lower inflation.

According to the Expectations Theory, a Negatively Sloped Yield Curve