Question 5 Since the turn of the year, US long-term interest rates have risen.

A) Explain what the so-called yield curve shows and illustrate the change in the US yield curve in a figure.

b) Explain the underlying mechanisms of why the yield curve has changed in this way.

c) Based on what you have learned in the course on what determines exchange rates, how can you expect the value of the dollar to be affected by this and why?