Final answer:
The statement is true; an upward-sloping yield curve is typically called a 'normal' yield curve, while a downward-sloping yield curve is often referred to as an 'inverted yield curve' and suggests economic concern. The normal yield curve reflects the increased risks associated with long-term lending, which demands higher yields. The correct option is A. True
Step-by-step explanation:
The statement that an upward-sloping yield curve is often referred to as a 'normal' yield curve is indeed true. The normal yield curve represents a condition in which longer-term debt instruments have a higher yield compared to short-term instruments due to the risks associated with time. Conversely, a downward-sloping yield curve, known as an inverted yield curve, is considered 'abnormal' as it suggests shorter-term debt instruments have higher yields than longer-term ones, which may indicate forthcoming economic downturns or recessions.
When analyzing labor markets, the relationship between real wages and labor supply involves both a substitution effect and an income effect. If the substitution effect is stronger, leading to increased labor supply as wages rise, the labor supply curve will have a 'normal' upward-sloping shape. However, this is related to labor economics, not directly to yield curves.
In macroeconomics, another downward-sloping curve is the Phillips curve, which shows the trade-off between unemployment and inflation. This curve suggests that in the short run, higher unemployment is associated with lower inflation and vice versa. Like yield curves, the Phillips curve can also shift, reflecting changes in the economy over time.
The correct option is A. True