Question #29
Reading: Reading 39 Economics and Investment Markets
PDF File: Reading 39 Economics and Investment Markets.pdf
Page: 10
Status: Incorrect
Correct Answer: A
Your Answer: B
Question
Which of the following is most likely to be the shape of the yield curve during recessions?
Answer Choices:
A. Upward sloping
B. Flat
C. Downward sloping
Explanation
During recessions, policy rates tend to be low. Over a longer period, investor's expect
inflation to be higher as the economy comes out of recession and hence longer-term rates
tend to be higher resulting in an upward sloping yield curve.