What is Subsidy?
Subsidy: Government money that lowers the cost of a product or activity.
Where Subsidy fits
Subsidy is part of Policy & Labor in Economics. Governments steer economies with taxes, spending, subsidies, price ceilings, tariffs and minimum wages. Each policy helps some groups and shifts costs to others.
Practical tip
Ask who benefits, who pays and what behavior changes.
Related terms
- Minimum wage
- The lowest pay the law allows for work.
- Gig economy
- Work done through short, flexible jobs rather than permanent roles.
- Supply shock
- A sudden event that sharply changes the supply of a good.
- Tariff
- A tax on imported goods.
- Price ceiling
- A legal limit on how high a price can go.
- Stagflation
- High inflation combined with slow growth and high unemployment.
- Fiscal policy
- Government spending and taxation choices.
- Unemployment rate
- The share of the workforce without a job.
Formulas you will use with it
Test yourself
Which term means: “Government money that lowers the cost of a product or activity.”?
Tariff · Minimum wage · Subsidy
Answer: Subsidy
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