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Suppose people expect a recession is starting and the Fed will take a response that will stimulate spending. Suppose people expect the recession to end
Suppose people expect a recession is starting and the Fed will take a response that will stimulate spending. Suppose people expect the recession to end after two years, and at that point they expect the Fed to reverse their actions taken at the onset of the recession. Draw and describe a yield curve that illustrates this situation. Identify the two-year maturity in your illustration.
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