Downward-slopping yield curves are observed
A) when the economy is growing.
B) when the economy is stagnant.
C) before the beginning of a recession.
D) None of the above.

Question

Quizplus · Accepted Answer

Downward-sloping yield curves are often observed before the beginning of a recession. This is because investors are willing to accept lower yields on longer-term bonds in anticipation of interest rate cuts and economic slowdown, which lead to a decrease in bond prices and an increase in yields.

Downward-Slopping Yield Curves Are Observed