If the federal government has a budget deficit it can finance its spending by

A. selling corporate bonds.

B. selling municipal bonds.

C. selling Treasury bonds.

D. All the above.

C. Selling Treasury bonds

Explanation:

Treasury bonds (T-bonds) are federal government debts instruments. Treasury bonds are one of the four risk-free securities offered by the government.

When the Federal government intends to borrow, it may offer treasury bonds. The bonds are considered risk free by investors. The government can not default on its payments. Treasury bonds have a fixed interest rate until maturity.

Treasury bonds have a maturity period of between 10 and 30 years. They earn a semi-annual interest payment until maturity. At maturity, the face value if paid in full to the bond owner.

Corporate bonds and municipal bonds are similar to treasury bonds. The major difference is that corporations offer corporate bonds, while local governments or state counties offer municipal bonds.