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subsidy

SUB-suh-dee /ˈsʌb.sə.di/

nounB2GREGMATIELTSTOEFLUPSC

formalpoliticaleconomic

A sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.

Subsidies are direct financial supports aimed at modifying market outcomes or supporting strategic national industries.

The story behind the word. In ancient Roman military tactic, 'subsidium' referred to the reserve line of military troops sitting in reserve ('sub' under + 'sedere' to sit) behind the front lines, ready to step in when help was needed. The financial sense of 'backup assistance' developed in the 16th century.

Word relationships

grant: A 'grant' is typically a one-off award of money for research or projects; a 'subsidy' is targeted ongoing support to reduce consumer costs or boost production.
allowance: 'Allowance' is a general term for allocated money, while 'subsidy' is specifically economic aid to influence market prices.

tax: A tax takes money away from individuals or businesses, while a subsidy provides money to them.
tariff: A tariff adds cost to imported goods, whereas a subsidy lowers production costs for domestic goods.

Commonly confused with

bailout: A subsidy is routine, policy-driven financial assistance; a bailout is emergency assistance to save a failing entity.

Word family

subsidize (verb): To support an enterprise or activity with financial grants.
subsidized (adjective): Supported by financial grants.

Collocations

agricultural subsidy
government subsidy
state subsidy
subsidize industry
eliminate subsidies

Example sentences

"The government introduced a solar power subsidy to encourage homeowners to transition to clean energy." Energy Policy
"Agricultural subsidies protect domestic farmers from sudden fluctuations in global commodity prices." Agricultural Economics

Memory hook

Sub-sidy = SUB (under) + SID (sit): Financial support sitting underneath to keep prices from falling or businesses from collapsing. Subsidy = Government financial support.

When not to use

Do not confuse with 'bailout'; a subsidy is an ongoing strategic financial support, whereas a bailout is emergency rescue funding for a failing company.

Fun facts

The root 'sedere' (to sit) is also found in 'presiding', 'sedentary', and 'president' (one who sits at the front).