The correct answer is B because the interest rate spread between long-term and short-term rates reflects market expectations about future economic conditions. A narrower spread indicates anticipation of lower short-term rates, which typically aligns with expectations of an economic downturn. Conversely, a wider spread suggests expectations of higher short-term rates and an economic upswing. This makes the spread a leading economic indicator, not a lagging one (A is incorrect). Option C is incorrect because the spread widens when short-term rates are expected to rise, not decline.