Question 2: Yield Curve and the Economy Suppose that worse-than-expected news about consumer condence increases the probability of a recession in the US next year. a. What do you expect will be the evolution of real interest rates and ination in the US during the next twelve months? Explain your answer with the help of the AD/AS diagram. How will the prices of 1-month T-bills, 1-year T-bills, and 1-year TIPS in the US react to the news? Explain your answer. What are the implications of this scenario in terms of the shape of the yield curve (normal, inverted, or at)? How does your answer to part (0) change if we assume that nominal interest rates are at the \"zero lower bound\