Final answer:
The U.S. government uses securities such as Treasury bonds, notes, and bills to finance its federal debt. These securities are sold to the public and promise repayment with interest in the future.
Step-by-step explanation:
The U.S. government uses securities, such as Treasury bonds, notes, and bills, to finance its federal debt. These securities are sold to the public, including U.S. citizens and foreigners, who lend money to the government in exchange for the promise of repayment with interest in the future.
For example, Treasury bonds have longer maturities, typically ranging from 10 to 30 years, and pay fixed interest rates. Treasury notes have medium-term maturities, usually ranging from 2 to 10 years, and also pay fixed interest rates.
Treasury bills have shorter-term maturities, usually ranging from a few days to a year, and are sold at a discount from their face value.
By issuing these securities, the government is able to raise the necessary funds to cover its budget deficits while providing a safe investment option for individuals and institutions.