Yield spreads tend to____ during recessions and ________ during times of economic prosperity.
A)narrow ...widen
B)widen ...narrow
C)stay constant ...widen
D)widen ...stay constant

Question

Quizplus · Accepted Answer

Yield spreads, which represent the difference between yields on different types of bonds or debt instruments, tend to widen (increase) during recessions as investors become more risk-averse and demand higher yields for riskier assets. Conversely, during times of economic prosperity, yield spreads tend to narrow (decrease) as investors feel more confident and are willing to accept lower yields for riskier assets.

Yield Spreads Tend To____ During Recessions and ________ During Times

Yield Spreads Tend To During Recessions and ____ During Times