Final answer:
Block grants are fixed funds given to states with more flexibility on how to use them, as opposed to categorical grants that have strict criteria and less discretion for the states.
Step-by-step explanation:
Fixed funds that are transferred to states for the implementation of a policy or program are called Block grants. Unlike categorical grants, which have strict limitations and use criteria, block grants provide states with more flexibility and fewer restrictions on how to spend the funds. This can give states the sovereignty to allocate resources in a way that best suits their local needs. Over time, though, the flexibility of block grants can be diminished through measures such as set-asides and cost ceilings, which place more control and conditions on their use.