Refer to the following figure when answering the following questions.
Figure 12.3: Yield Curves December 4, 2006 and 2012
-Consider the yield curves in Figure 12.3. The curve for 12/4/2006 is unusual because:
A) it has no relationship to the real economy.
B) its short-term interest rates are higher than long-term interest rates.
C) it is inverted.
D) it is higher than the yield curve for 2012.
E) It is not unusual.

Question

Refer to the following figure when answering the following questions.
Figure 12.3: Yield Curves December 4, 2006 and 2012 
-Consider the yield curves in Figure 12.3. The curve for 12/4/2006 is unusual because:
A) it has no relationship to the real economy. 
B) its short-term interest rates are higher than long-term interest rates. 
C) it is inverted. 
D) it is higher than the yield curve for 2012. 
E) It is not unusual.

Quizplus · Accepted Answer

The yield curve for 12/4/2006 is inverted, which means that short-term interest rates are higher than long-term interest rates. This is unusual because it typically indicates that the market expects a recession in the future.

Refer to the Following Figure When Answering the Following Questions