Which of the following is true of the yield curve?
A)The yield curve is steep and is upward sloping when the recession ends and the economy starts to recover.
B)The yield curve is flat and is downward sloping when the recession ends and the economy starts to recover.
C)The yield curve is flat or inverted when the term premium is small.
D)The yield curve is downward sloping when the term premium is large.

Question

Quizplus · Accepted Answer

A steep and upward sloping yield curve typically signals that the economy is recovering from a recession, as longer-term interest rates are higher than shorter-term rates. This is because investors expect future economic growth and inflation, leading to higher borrowing costs in the long term.

Which of the Following Is True of the Yield Curve