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Figure 16.8 Downward-Sloping Yield Curve[3]
A flat yield curve indicates that future interest rates are expected to be about the same as
current interest rates or that capital will be about as productive in the economy as it is
now. A downward-sloping yield curve shows that future interest rates are expected to be
lower than current rates. This is often interpreted as a signal of a recession, because
capital would be less productive in the future if the economy were less productive then.