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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
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
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
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