Final answer:
The claim that Treasury bills provide higher returns than long-term government bonds is false. Treasury bills are short-term securities with lower yields, whereas long-term bonds offer higher returns to compensate for increased risks over longer investment periods.
Step-by-step explanation:
The statement that Treasury bills typically provide higher average returns, both in nominal terms and in real terms, than long-term government bonds is false. Treasury bills, or T-Bills, are short-term securities with maturities of one year or less, and they generally offer lower yields compared to long-term government bonds such as Treasury notes and bonds, which have longer maturities.
The interest rates for long-term bonds are usually higher to compensate investors for the greater risk of interest rate fluctuations over time, and potentially higher inflation. Additionally, the U.S. government can issue Treasury notes (2-10 years maturity) or Treasury bonds (more than 10 years up to 30 years maturity), which often offer higher returns than T-Bills due to longer investment terms.
Corporate bonds, on the other hand, typically pay a higher interest rate than Treasury bonds due to the higher risk associated with corporate borrowers, as noted by Moody's bond ratings.