The yield curve in an economic period where lower future inflation is expected would be ________.

Question

Quizplus · Accepted Answer

In an economic period where lower future inflation is expected, the yield curve would be downward-sloping. This is because investors would demand lower yields on long-term bonds, anticipating the decrease in inflation and therefore the decrease in the risk of rising interest rates in the future. As a result, short-term interest rates would be higher than long-term interest rates, causing a downward slope in the yield curve.

The Yield Curve in an Economic Period Where Lower Future