Definition
Subsidies may take the form of grants, tax credits, price supports, loans, guarantees, or direct payments.
Political Dictionary
Subsidy
A subsidy is government support that lowers costs or raises returns for selected activities.
Why It Matters
They can encourage public goals but may distort markets or favor particular groups.
How It Works
Government provides financial support under eligibility and program rules.
History
Subsidies have long been used for agriculture, transportation, energy, housing, and industry.
Example
A tax credit may subsidize renewable-energy investment.
Common Misconceptions
- Subsidies are always cash payments.
- They never affect prices.
- Every subsidy is economically wasteful.
Related Terms
- Fiscal Policy
- Monetary Policy
- Inflation
- Economic Growth
- Government Spending
Related Topics
See Also