An unusually steep yield curve suggests that:
A)short-term interest rates are expected to rise.
B)short-term interest rates are expected to fall.
C)the economy is headed for a recession.
D)long-term interest rates will rise.

Question

Quizplus · Accepted Answer

An unusually steep yield curve is usually an indication that short-term interest rates are expected to rise. This is because the steepness of the yield curve reflects the difference in interest rates between short-term and long-term bonds. If long-term bond yields are increasing faster than short-term bond yields, then it suggests that investors expect short-term interest rates to rise in the near future.

An Unusually Steep Yield Curve Suggests That