Suppose you're a financial advisor...

a. One of your clients tells you she is considering to purchase long-term bonds because their interest rate might go up to 8%. How would you advise her given the current and future stance of the monetary policy in the US?

b. Would you make a recommendation to your client to buy a house when mortgage rates are 4%, and the central bank is setting, through forward guidance, the expected inflation at 5%?

c. You have collected some economic indicators and they show an imminent slowdown of the economy (the number of layoffs increased, the growth rate of productivity fell). Using the yield curve, how could you graphically present the following situations to your boss: (1) the economy doesn't recover in the short run, and (2) the economy worsens in the short run? Explain.