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Suppose the Economy Has an Inverted Yield Curve

Question 82

Multiple Choice

Suppose the economy has an inverted yield curve. According to the expectations hypothesis, which of the following interpretations could be used to explain this?


A) Interest rates are expected to fall in the future
B) Investors prefer bonds with less default risk.
C) Investors prefer bonds with less interest-rate risk.
D) The term spread is positive.

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