Question from Volume 2 exam structure, decrease, increase, interest, correct

busprof

An economist has forecast that the term structure of interest rates will remain perfectly flat. According to the liquidity preference theory, the economist’s forecast implies that future shortterm interest rates will:
A. decrease over time.
B. increase over time.
C. equal current shortterm interest rates.
I thought the correct answer would be B, but it’s not? Please explain.

chandsingh

I’m still really confused? Is it because they’re talking about shortterm future rates rather than longterm?

ishfaque

Ahhh, I get it now!
Thank youu!