When a yield curve has a positive slope:
A) long-term yields are higher than short-term yields.
B) short-term yields are higher than long-term yields.
C) the bond market is expecting default by bond issuers.
D) the inflation rate is expected to fall.

Question

Quizplus · Accepted Answer

A positive slope of the yield curve indicates that long-term yields are higher than short-term yields. This suggests that investors demand higher yields as compensation for holding bonds with longer maturity dates. This can reflect expectations of future inflation or economic growth.

When a Yield Curve Has a Positive Slope