Downward-slopping yield curves usually occur
A) when the economy is growing.
B) when the economy is stagnant.
C) before the beginning of a recession.
D) None of the above

Question

Quizplus · Accepted Answer

Downward-sloping yield curves, also known as inverted yield curves, typically occur before the start of a recession. This is because investors are pessimistic about the future and expect interest rates to decline, leading to lower yields on long-term bonds. As a result, the yield curve becomes inverted, with shorter-term bonds having higher yields than longer-term bonds.

Downward-Slopping Yield Curves Usually Occur