Question

which of the following accurately describes a normal yield curve?
a negatively sloping curve that indicates confidence in rising inflation in the future.
a negatively sloping curve that indicates the expectation that the economy will contract in the future.
a positively sloping curve that indicates confidence in sustained economic growth in the future.
a positively sloping curve that indicates the expectation that inflation will fall in the future.

Explanation:

A normal yield curve is typically upward (positively) sloping. It reflects the expectation of sustained economic growth, as longer - term bonds have higher yields to compensate for factors like inflation and interest rate risks in a growing economy. A negatively sloping curve (inverted) is associated with economic contraction. The first option's description of a negative slope and rising inflation is incorrect. The second option's negative slope and economic contraction is for an inverted curve. The fourth option's positive slope with falling inflation expectation is incorrect. Only the third option correctly describes a normal yield curve with a positive slope and confidence in sustained economic growth.

Answer:

C. A positively sloping curve that indicates confidence in sustained economic growth in the future. (Note: Assuming the options are labeled A, B, C, D in order, the third option here is labeled as C for clarity. If the original labeling is different, adjust the identifier accordingly.)