Recall that the yield curve plots the interest rates, at a certain point in time, of bonds having equal credit quality, but differing maturity dates, and is used as a benchmark for mortgage rates or bank lending rates. A normal yield curve is one in which longer maturity bonds have a higher yield compared to shorter-term bonds due to the risks associated with time. In an inverted yield curve, the shorter-term yields are higher than the longer-term yields, which can be a sign of recession. In a flat yield curve, the shorter- and longer-term yields are very close to each other, which is a predictor of an economic transition. The black curve (X symbols) on the following graph shows the economy's yield curve in Period 1. Suppose that in Period 2, the Fed is able to keep longer-term rates fairly constant while selling $400 billion worth of shorter-term Treasury securities. Which of the other two lines, the blue line (circle symbols) or the orange line (square symbols), on the graph best describes the yield curve resulting from the Fed's actions in Period 2? Yield Percent) 4.0 3.2 2.4 1.6 0.8 0.0 Maturity [Years The blue line (dot symbols) The orange line (square symbols) Andrew wants to buy a car and considers taking a four-year car loan. Based on the yields to maturity in Period 1 and Period 2 on the previous graph, when would be the best timing for the purchase? (Hint: Place the mouse over the points on the previous graph to compare the rates for the loans of the given maturity.) O Period 2, because shorter-term rates will decrease O Either period, because longer-term rates will not change O Period 1, because shorter-term rates will increase