Suppose the Economy Has an Inverted Yield Curve

question 82

Multiple Choice

Suppose the economy has an inverted yield curve. According to the expectations hypothesis, which of the following interpretations could be used to explain this?

• A) Interest rates are expected to fall in the future
• B) Investors prefer bonds with less default risk.
• C) Investors prefer bonds with less interest-rate risk.
• D) The term spread is positive.

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Definitions:

National Association

A broad term that describes a formal organization or grouping at the national level, typically focused on unifying members of a particular profession, industry, or interest for common aims or advocacy.

Advancement of Colored People

Referring to the National Association for the Advancement of Colored People (NAACP), an organization founded in 1909 to ensure the political, educational, social, and economic equality of rights of all persons and to eliminate race-based discrimination.

Collective Action

The action taken together by a group of individuals who are motivated by a common interest, objective, or cause, especially in the context of social or political issues.

Social Movements

Organized efforts by a large group of people to promote or resist change in society.