Under the Expectations Hypothesis, a Downward-Sloping Yield Curve Suggests

question 61

Multiple Choice

Under the expectations hypothesis, a downward-sloping yield curve suggests:

• A) investors expect future short-term interest rates to fall.
• B) investors expect future short-term interest rates to rise.
• C) this is a trick question, the yield curve always slopes upward.
• D) investors expect future short-term interest rates to remain constant.

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Definitions:

Gibbons v. Ogden

A landmark Supreme Court case in 1824 that held Congress has the power to regulate interstate commerce under the Commerce Clause of the Constitution.

Interstate Commerce

Economic activity, trade, or the movement of goods and services that crosses state borders, falling under the regulatory power of the federal government according to the U.S. Constitution.

National Power

The strength and influence of a country on a global scale, encompassing military, economic, political, and cultural aspects.

Federalism

A system of government where power is divided among a central authority and constituent territorial units.