The shape of the yield curve helps indicate the expectations of which of the following?

The yield curve is a graphical representation of the interest rates on debt for a range of maturities that typically reflects the expected future interest rates. When analyzing the yield curve, upward slopes indicate that investors expect rising interest rates in the future, while a downward slope suggests expectations of falling interest rates. Therefore, it provides critical insight into market expectations concerning future economic conditions, including the direction of interest rates.

This relationship stems from the concept that longer-term investments usually demand higher yields to compensate for the uncertainty tied to future economic conditions and inflation. As a result, the shape of the yield curve serves as a predictor of potential movements in interest rates, which directly impacts financing costs, investment decisions, and overall economic growth.