Question: 1 . Explain what i t means for the yield curve t o invert. 2 . Using bond demand and supply model ( o r

1. Explain what it means for the yield curve to invert.
2. Using bond demand and supply model (or loanable fund model), explain what changes in bond demand and supply, separately for both short-term and long-term bonds would result inan inverted yield curve.
3.To revert the inverted yield curve back to normal shape, what bonds should the Fed buy and sell to make the yield curve normal again?
4. What bonds would a bond portfolio manager buy and sell if they knew in advance the yield curve will invert, if their goal isto make a profit.

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