According to the expectations theory, a positively sloped yield curve usually reflects
A)an increase in expected future income.
B)a decrease in expected future income.
C)a decrease in expected future prices.
D)an increase in the money supply.

Question

Quizplus · Accepted Answer

The expectations theory suggests that a positively sloped yield curve reflects an increase in expected future interest rates, which can be associated with an increase in expected future income. This is because higher future income expectations can lead to higher spending, potentially increasing inflation and prompting central banks to raise interest rates.

According to the Expectations Theory, a Positively Sloped Yield Curve