True or False: The yield curve usually slopes downward.

The statement that the yield curve usually slopes downward is false. Typically, the yield curve is upward sloping, indicating that longer-term interest rates are higher than short-term rates. This reflects the normal expectation that investors require a premium for the increased risk associated with longer time horizons, such as uncertainty about future economic conditions, inflation, and interest rates.

In certain economic situations, such as during recessions, the yield curve may invert, leading to a downward slope. However, this is not the typical case. The normal upward slope signifies growth and the anticipation of higher inflation or economic expansion in the future, as investors seek greater returns for taking on additional risk over time. The downward slope (inversion) can be seen as a signal of potential economic downturns, but this is not a common occurrence.

Thus, stating that the yield curve usually slopes downward misrepresents the general trend observed in financial markets.