Question #7
Reading: Reading 25 The Term Structure and Interest Rate Dynamics
PDF File: Reading 25 The Term Structure and Interest Rate Dynamics.pdf
Page: 3
Status: Correct
Correct Answer: A
Question
Rising inflation when the economy is expanding could most likely lead to a:
Answer Choices:
A. bearish flattening
B. bearish steepening
C. bullish steepening
Explanation
During expansionary times, to combat rising inflation, central banks may raise short-term
rates leading to a bearish flattening of the yield curve.