4. ANSWER: D. It's when short-term Treasury notes pay a higher interest rate than long-term government notes and bonds.
Inverted yield curves are usually taken as a warning that the economy is slowing and may go into a recession. Longer-dated maturities typically yield more than shorter ones; when that relationship reverses, it could be because investors foresee lower interest rates as the economy slows along with borrowing demand. However, there are exceptions, and an inverted yield curve doesn’t always spell disaster.