If the Yield Curve Begins to Rise Sharply, It Is

question 24

Multiple Choice

If the yield curve begins to rise sharply, it is usually an indication that

• A) stocks are offering low returns as the economy enters a recession.
• B) inflation rates have peaked and are about to decline.
• C) bond prices are expected to increase.
• D) inflation is starting to increase, or is expected to do so in the near future.

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Definitions:

Open Market Committee

A committee within a central bank, like the Federal Reserve in the United States, that makes key decisions about interest rates and the growth of the United States money supply.

Federal Reserve System

The central banking system of the United States, responsible for monetary policy, regulation of financial institutions, and management of the country's money supply.

Required Reserves

The minimum amount of reserves a bank is required to hold by central bank regulation, aimed at ensuring the bank's liquidity and stability.

Excess Reserves

The surplus funds that a bank or financial institution possesses beyond the mandatory requirements set by regulatory bodies, creditors, or its own internal governance protocols.