the economics of money, banking, and financial markets

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49. 
    

    An inverted yield curve predicts that short-term interest rates ____.
    A) are expected to rise in the future
    B) will rise and then fall in the future
    C) will remain unchanged in the future
    D) will fall in the future
    Answer: D
    Diff: 1 Type: MC Page Ref: 128
    Skill: Applied
    Objective List: 6.2 Explain how interest rates on bonds with different maturities are related

    
    


50. 
    

    When short-term interest rates are expected to fall sharply in the future, the yield curve will
    ____.
    A) slope up
    B) be flat
    C) be inverted
    D) be an inverted U shape
    Answer: C
    Diff: 1 Type: MC Page Ref: 128
    Skill: Applied
    Objective List: 6.2 Explain how interest rates on bonds with different maturities are related

    
    


51. 
    

    If investors expect interest rates to fall significantly in the future, the yield curve will be
    inverted. This means that the yield curve has a ____ slope.
    A) steep upward
    B) slight upward
    C) flat
    D) downward
    Answer: D
    Diff: 1 Type: MC Page Ref: 128
    Skill: Applied
    Objective List: 6.2 Explain how interest rates on bonds with different maturities are related

    
    


52. 
    

    When the yield curve is flat or downward-sloping, it suggests that the economy is more
    likely to enter ____.
    A) a recession
    B) an expansion
    C) a boom time
    D) a period of increasing output
    Answer: A
    Diff: 1 Type: MC Page Ref: 129
    Skill: Applied
    Objective List: 6.2 Explain how interest rates on bonds with different maturities are related