Economics & AnalysisQuestion 100 of 100
If the yield curve is inverted, meaning short-term rates exceed long-term rates, this is often interpreted as:
a.A potential signal of an approaching economic slowdown or recession
b.A guarantee of strong future growth
c.Evidence of falling inflation only
d.Proof that bond prices cannot change
Explanation
An inverted yield curve, where short-term yields exceed long-term yields, has historically been viewed as a possible warning of an economic slowdown or recession. It reflects expectations of future rate cuts amid weakening growth. Advisers monitor the curve as one of several signals, not a certainty.
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