What is a government subsidy?

A government subsidy is essentially a sum of money granted by the government to assist businesses, particularly in sectors that may struggle due to market competition or other economic factors. This financial support aims to help stabilize prices, encourage production, or promote certain industries deemed beneficial for economic growth or public welfare.

Subsidies can take various forms, including direct cash payments, tax breaks, or grants, and are commonly used in agriculture, renewable energy, and other key industries. The goal of these subsidies is to lower the cost of production for businesses, making their products more affordable for consumers and sustaining employment in critical sectors.

In contrast, the other options describe different financial mechanisms, such as taxes, loans, or fees, which do not provide the same direct monetary assistance aimed at promoting business operations. Each of those options serves different purposes in economic policy, but none defines a subsidy as effectively as the correct choice does.