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Draw the yield curve described as follows: Interest rates: 1% in year 1; 2% in year 2; 2% in year 3; 3% in year 4.

Draw the yield curve described as follows:

Interest rates: 1% in year 1; 2% in year 2; 2% in year 3; 3% in year 4.

Term premiums: 0.5% for a one-year bond, rising by 0.25% for each additional year of maturity. What does this yield curve suggest is the predominant short to medium-term economic outlook among market participants?

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