OPTION C IS INCORRECT PLEASE FIND THE CORRECT ANSWER

You and a friend are reading The Wall Street Journal and notice that the Treasury yield curve is slightly upward-sloping. Your friend comments that all looks well for the economy but you are concerned that the economy is heading for trouble. Assuming you are both believers in the liquidity premium theory, what might account for your difference of opinion? The difference in opinion: could reflect different views on the size of the risk premium. A slightly upward-sloping yield curve, if the risk premium is large enough, could mean that interest rates are expected to fall, indicating a weak economy and the basis of your assessment. reflects your superior economic knowledge. Under no circumstances could your friend's assessment be correct because your view is accurate. could reflect different views on the size of the risk premium. Your friend obviously thinks the risk premium is bigger than you do and so the yieid curve being slightly upward-sioping indicates a healthy economy. reflects your friend's superior economic knowledge. Under no circumstances could your assessment be correct because your friend's view is accurate