According to the liquidity premium theory,if market participants expect that inflation in the future will be lower than it currently is,the yield curve will
A) slope upward.
B) be flat.
C) be inverted.
D) be vertical.

Question

Quizplus · Accepted Answer

The liquidity premium theory suggests that if future inflation is expected to be lower, long-term interest rates will be lower than short-term rates, leading to an inverted yield curve.

According to the Liquidity Premium Theory,if Market Participants Expect That