In the Early 1980s,the Treasury Yield Curve Had a Severe

question 69

Essay

In the early 1980s,the Treasury yield curve had a severe downward slope with short-term yields near 20% and long-term yields below 15%. Explain how such a pattern might occur.

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Definitions:

Market Interest Rate

The prevailing rate at which borrowers are willing to borrow money and lenders are willing to lend in the financial market.

Basic Scientific Research

The initial stage of scientific inquiry aimed at gaining more comprehensive knowledge or understanding of the subject without specific applications towards processes or products in mind.

Positive Externalities

Benefits that are enjoyed by a third-party or the broader society as a result of an economic transaction or activity, without them directly participating in it.

Public Good

A good or service that is characterized by nonrivalry and nonexcludability. These characteristics typically imply that no private firm can break even when attempting to provide such products. As a result, they are often provided by governments, who pay for them using general tax revenues.