Final answer:
The expectations hypothesis suggests an upward sloping yield curve predicts rising interest rates, thus the statement is true. Interest rates are likely to decline with a rise in supply of money or credit. If a currency is projected to appreciate, yields on government bonds may decrease due to increased demand for that currency.
Step-by-step explanation:
Understanding Yield Curve and Interest Rate Movements
When we consider the expectations hypothesis, it addresses how future interest rates are likely to behave. According to this hypothesis, an upward sloping yield curve indicates that the market anticipates that interest rates will increase in the future. Hence, the correct answer to the statement is True.
Regarding the changes in the financial market that can lead to a decline in interest rates, an increase in the supply of money or credit would typically lead to lower interest rates, all else being equal. Therefore, the answer is a rise in supply would result in a decline in interest rates (option C).
Lastly, if a country's currency is expected to appreciate, it can influence the yield on its government bonds. Appreciation usually means stronger demand for a currency, and as investors purchase more of the currency to acquire the assets, this can lead to lower yields, since higher demand for the bonds tends to decrease the interest rate or yield required to entice investors.