Final answer:
An inverted yield curve indicates that long-term bonds yield less than short-term ones, typically as a result of actions by the Federal Reserve to control inflation and indicative of an anticipated economic slowdown.
Step-by-step explanation:
An inverted yield curve signifies a situation in which long-term bonds are yielding less than short-term bonds. This anomalous condition is often considered a warning signal for economic downturns or recessions, as it suggests that investors expect lower interest rates in the future due to a sluggish economy. While an inverted yield curve can also indicate investor sentiment and expectations that central banks, such as the Federal Reserve, might lower rates to combat anticipated inflation or economic hardship, it does not reflect long-term investors being rewarded for additional risk, nor does it suggest that intermediate-term bonds are yielding the most.
Therefore, when confronted with the question, 'An inverted yield curve means?', the most accurate response is 4) It generally results from actions by the Federal Reserve to control inflation. This is because the Federal Reserve may influence short-term rates through its monetary policy, affecting the shape of the yield curve.