Question

A steep yield curve reflects expectations that the economy will worsen in the future.

True False

Answer 1

ANSWER-

A steep yield curve reflects expectations that the economy will worsen in the future is FALSE.

A steep yield curve shows that long-term and the short-term interest rates has widen which means long-term bond price will decrease as compared to short-term bonds. It indicates strong economic activity and rise in expectation of inflation and thus the interest rates will be high.

So, A steep yield curve reflects expectations of strong economic growth in future and rising inflation.