Which of the following is a possible outcome of a negative or low term spread?
A)A low of negative spread may indicate higher short-term interest rates in the future.
B)A low or negative spread may cause the yield curve to slope upward.
C)A low or negative spread may reduce lending by banks.
D)A low or negative spread may indicate the early stages of economic expansions.

Question

Quizplus · Accepted Answer

A low or negative term spread means that short-term interest rates are higher than long-term interest rates, which may reduce lending by banks as it reduces the profitability of their lending activities.

Which of the Following Is a Possible Outcome of a Negative