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 future interest rates to be lower than current rates. This implies that they expect future inflation rates to be lower than current rates, resulting in a decrease in expected future prices.

According to the Expectations Theory, a Negatively Sloped Yield Curve