Q:
A:
A diagram of yields on debt instruments
shows that shortterm interest rates are higher than
longterm interest rates. What is this called, and
what does it indicate?
a) An inverted yield curve indicating an unhealthy
economy
b) A flat yield curve indicating slow growth
c) A positive yield curve indicating prosperity
d)
A balanced yield curve indicating rapid expansion
in the short term
The correct answer is a.
An inverted—or negative—yield curve is an unusual situation that generally indicates an unhealthy economy marked by low confidence and high inflation.
An inverted—or negative—yield curve is an unusual situation that generally indicates an unhealthy economy marked by low confidence and high inflation.
MORE FAQS

Why are the term structure of interest rates indicative of future interest rates?

Below is an example of US Treasury yields for various maturities ...

How can the yield curve help me make investment decisions?

What is the difference between term structure and a yield curve?

What is the current yield curve and why is it important?

What does the yield curve actually predict?

What are the different formations of yield curves?

Where on the Internet can I find yield curves over various periods?

What is the correlation between term structure of interest rates and recessions?

What is the difference between the Daily Treasury LongTerm Rates and the Daily Treasury Yield Curve Rates?

What does market segmentation theory assume about interest rates?

How can I create a yield curve in Excel?

Why is term structure theory of importance to economists?

What is the difference between yield and rate of return?

What is the difference between the yield of stock and the yield of a bond?

How many attempts at each CFA exam is a candidate permitted?

What's the average salary of a financial advisor?

Why is Hong Kong considered a tax haven?

Is smart beta cheaper than hedge funds?
RELATED FAQS

Why are the term structure of interest rates indicative of future interest rates?
Learn why economists believe the term structure for interest rates reflects investor expectations for future interest rates ... 
Below is an example of US Treasury yields for various maturities ...
The correct answer is b. A normal yield curve chart shows longterm debt instruments having higher yields than shortterm ... 
How can the yield curve help me make investment decisions?
Learn about the yield curve, and discover why this chart is an important economic indicator. How do Treasury bond yields ... 
What is the difference between term structure and a yield curve?
Understand the difference between the term structure of interest rates and a yield curve, if any. Learn what the yield curve ... 
What is the current yield curve and why is it important?
Understand what the current yield curve represents, and learn how market analysts commonly interpret various changes in the ... 
What does the yield curve actually predict?
Find out what an inverted yield curve represents, how it has performed as a leading indicator and why it appears to hold ...
RELATED TERMS

Normal Yield Curve
A yield curve in which shortterm debt instruments have a lower ... 
Term Structure Of Interest Rates
The relationship between interest rates or bond yields and different ... 
Flat Yield Curve
A yield curve in which there is little difference between shortterm ... 
Inverted Yield Curve
An interest rate environment in which longterm debt instruments ... 
Yield Elbow
The point on the yield curve indicating the year in which the ... 
Humped Yield Curve
A relatively rare type of yield curve that results when the interest ...