Question

A flattening or inverted U.S. Treasury Yield Curve generally warns of or implies:

a) Growing economic prospects

b) More uncertainty in the short run vs. the long run

c) potential for economic recession

d) Both (b) and (c)

Answer 1

Answer= c

Explanation:

A flat yield curve is a warning sign of slow possible growth and inverted yield curve indicate a possible recession soon.

An inverted yield curve occurs when long term yield falls below short term yields. An inverted yield curve indicates that investors expect the economy to slow or decline in the future, and this slower growth may lead to lower inflation and lower interest rates. An inverted yield curve typically indicates that the Federal Reserve is ‘tightening’ monetary policy, which has the effect of limiting the money supply and makes credit less available. An inverted yield curve is often viewed as a harbinger of an economic recession

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