If the Federal reserve is easing monetary policy at the end of a recession, you would expect the yield curve to be:
A) upward sloping.
B) flat.
C) inverted.
D) humped.
E) none of the above

Question

Quizplus · Accepted Answer

When the Federal Reserve eases monetary policy at the end of a recession, it usually lowers short-term interest rates. This causes the yield curve to become upward sloping, as long-term interest rates remain higher than short-term rates. This is because investors demand a higher return for investing in longer-term securities due to the higher inflation risk and uncertainty associated with longer investment horizons.

If the Federal Reserve Is Easing Monetary Policy at the End