Answer: bearish flattening.

## Explanation **Correct Answer: B** **Bearish flattening** occurs when: - Short-term rates rise more than long-term rates - This typically happens when central banks tighten monetary policy to control inflation - The yield curve flattens but the overall level of rates increases (bearish) **Why this scenario fits:** - During economic expansion, central banks raise benchmark rates (short-term rates) - Long-term rates may also rise but typically less than short-term rates - This causes the yield curve to flatten while overall rates are rising **Why other options are incorrect:** - **Option A (Bullish flattening)**: Occurs when long-term rates fall more than short-term rates, typically in economic slowdowns - **Option C (Bearish steepening)**: Occurs when long-term rates rise more than short-term rates, which is less common in monetary tightening scenarios

Author: LeetQuiz Editorial Team