An inverted yield curve would suggest that
A) interest rates are expected to rise.
B) interest rates are expected to fall.
C) inflation is expected to rise in the future.
D) long-term rates are being pushed up by Federal Reserve policy.

Question

Quizplus · Accepted Answer

An inverted yield curve occurs when short-term interest rates are higher than long-term interest rates. This suggests that investors are anticipating a decrease in economic growth and that interest rates will fall in the future. This is because long-term investments are more uncertain, and investors require a higher return to compensate for that risk. Therefore, an inverted yield curve is often seen as a sign of an upcoming recession or economic slowdown.

An Inverted Yield Curve Would Suggest That