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Suppose short-term traders dominate the Treasury markets, that there are liquidity premiums, and that the markets expect the rate of inflation to fall over the

Suppose short-term traders dominate the Treasury markets, that there are liquidity premiums, and that the markets expect the rate of inflation to fall over the next few years. On the basis of only this information, for todays current yield curve which statement is the most accurate? 1. It is possible that short-term rates roughly equal long-term rates 2. The yield curve can be convex but not concave 3. Current long-term rates should definitely exceed current short-term rates 4. Current short-term rates should definitely exceed current long-term rates

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