The key features of the behavior of the yield curve over the typical business cycle are?

(a) positively sloped average yield curve

(b) high and flat or inverted at the peak of a cycle

(c) low and steep at the trough

Explain how Figure below displays these key features. Pick at least one business cycle where these 3 empirical features are displayed.

Figure: Slope of the Yield Curve over the Business Cycle

Transcribed Image Text:

FRED 5 www 1 0 30-Year Treasury Constant Maturity Rate-3-Month Treasury Constant Maturity Rate -1 1985 1990 1995 2000 2005 2010 Source: Board of Governors of the Federal Reserve System (US) 2015 fred.stlouisfed.org 2020 FRED 5 www 1 0 30-Year Treasury Constant Maturity Rate-3-Month Treasury Constant Maturity Rate -1 1985 1990 1995 2000 2005 2010 Source: Board of Governors of the Federal Reserve System (US) 2015 fred.stlouisfed.org 2020

Answer rating: 100% (QA)

In the graph above a yield curve represents yields interest rates of bonds having equal credit quali... View the full answer