Assume congress passes a law that makes interest on 20 year bonds tax free (no taxes on 20 year bond interest), but interest on 1 year bonds is still taxed. Given this information you would expect the term structure to move to a ....

steeper slope because demand for 20 year bonds would decrease.

flatter slope because demand for 20 year bonds would increase.

flatter slope because demand for 20 year bonds would decrease.

steeper slope because demand for 20 year bonds would increase.

YTM Maturity 1 year 20 year