Question 1
(i)
Arturo generally looked at the yield curve basing his argument on economic grounds. According to him, the slope of the curve tends to have a positive relationship with the real GDP of U.S. This points out that when the yield curve has a positive slope, the rate of economic growth should be strong over the next four to six quarters. The opposite also applies i.e. when the yield curve is negatively sloped, growth would be low. Arturo went further in his analysis of the yield curve to see how a given change would affect the economy based on ...