Answer: investors expect interest rates to fall.

A downward-sloping (inverted) yield curve typically indicates that investors expect future interest rates to fall. This occurs because long-term bonds have lower yields than short-term bonds, suggesting market expectations of declining interest rates in the future. Option A is incorrect because rising inflation would typically lead to higher interest rates and an upward-sloping yield curve. Option C describes a technical aspect but is not the primary implication of a downward-sloping yield curve.

Author: LeetQuiz Editorial Team