What is the difference between a subsidy and a grant in financial assistance?

The distinction between a subsidy and a grant is significant in the context of financial assistance. A subsidy directly lowers the cost of goods or services, making them more affordable for consumers or businesses. This can take various forms, such as price reductions, tax breaks, or specific financial incentives aimed at encouraging certain behaviors or supporting specific industries.

On the other hand, a grant refers to a sum of money offered for a specific purpose that does not require repayment. Grants are often awarded by governments, foundations, or organizations to support projects, initiatives, or research. They are typically conditional on meeting certain criteria or objectives but do not create a financial liability for the recipient.

Therefore, the correct answer accurately reflects these definitions: a subsidy reduces costs (making things cheaper), while a grant provides financial aid that does not need to be repaid. Understanding this distinction is crucial for anyone involved in financial planning or aiming to utilize these forms of financial assistance effectively.