Subsidy
Definition
A subsidy is financial assistance extended by government to an economic sector (or institution, business, or individual) with the aim of promoting economic and social policy.
Analogy
Imagine if your parents gave you extra allowance money so you could afford better study materials. That's essentially what subsidies are - they're funds given out (usually by governments) to help boost certain sectors or activities.
Related terms
Fiscal Policy: This refers to how governments adjust taxes and spending levels in order to monitor and influence their nation’s economy. It's like your parents deciding how much allowance you should get based on their income and expenses.
Protectionism: This is when governments take actions to restrict imports, protecting domestic industries. It's like if your parents decided to only buy you study materials from local stores, even if they're more expensive.
Economic Interventionism: This is a policy where the government intervenes in the economy to correct market failures or promote social welfare. Like your parents stepping in when they see you struggling with studying and providing extra resources.
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