CAF-7 · Chapter 9 · Question 6 of 15
What does an 'inverse' (downward-sloping) yield curve typically indicate to the financial markets?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Markets expect short-term interest rates to fall at some time in the future
Explanation
A normal yield curve slopes upwards. When it slopes downwards (inverse), long-term rates are lower than short-term rates, indicating the market anticipates a future decline in overall interest rates.
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