If investors believe inflation will be increasing in the future, the prevailing yield will be downward sloping.

Name: If investors believe inflation will be increasing in the future, the prevailing yield will be downward sloping.
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Question

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If investors expect inflation to rise, they will demand higher yields for long-term bonds to compensate for the anticipated decrease in purchasing power, leading to an upward sloping yield curve.

If Investors Believe Inflation Will Be Increasing in the Future