Shape of yield curve

CFA Level II Portfolio Management
#1

I am confused by the shape of the yield curve.

The inter-temporal rate of substitution model suggests that the current real interest rate will be low if the current economic situation is good and the future one is expected to be bad.

However, in the later part of the book, it suggests that yield curve will be downward sloping if we expect there will be a recession in future. The 2 concepts seem contradictory to each other, isn’t it?

#2

I’m pretty certain that schweser says if the current economic situation is good then people spend more now and the real rate rises…

#3

Yes, alternatively - intertemporal states if current state of economy is bad => more savings in risk-free assets => lower real interest rates.

#4

1+R = 1/ E(mt) = MU0/ MUt

Current economic situation is bad => MU0 increase => high R.

Isn’t it what the intertemporal model inferred?