Ignore my other comment. According to Mulesoft expert it's answer C: https://help.mulesoft.com/s/question/0D56R00008fIqYTSA0/error-handling-in-mule-4-course

Answer B

OnContinue returns the Payload, OnPropagate returns the Error object, which contains the message "Validation Error".

The correct answer is "C". I've replicated this scenario in Studio to confirm it. It's crucial to note that "On error propagate" generates an "error," unlike "on error continue," which produces a successful message. Since the listener's default error response configuration is "output text/plain --- error.description " any payload set within this error handling (on error propagate) becomes ineffective. To display the actual payload set inside an "on error propagate," you need to modify the default behaviour. Change "output text/plain --- error.description" to "payload" in the Listener -> Responses -> error response section - Body.

If both the private flow and the parent flow have on-error-propagate elements, and the private flow's on-error-propagate specifies "Child error" while the parent flow's on-error-propagate specifies "Parent error," then the error would be propagated to the parent flow's on-error-propagate. In this case, the error message returned to the web client would be "Parent error." So, if the parent flow has an on-error-propagate element with the message "Parent error," the correct response message to the web client request in the main flow's HTTP Listener is: B. "Parent error"