Final answer:
A grant is a type of transfer payment where one level of government transfers money to another level of government for specific purposes, often with conditions on how it is to be spent. It is used as a positive financial inducement to encourage states to work towards national goals.
Step-by-step explanation:
A grant is a type of transfer payment where one level of government transfers money to another level of government for specific purposes. The federal government grants money to states and local governments for initiatives such as road construction, education, and urban renewal. The money generally comes with stipulations on how it is to be spent, and if it is not spent correctly, it must be repaid. Grants are often used as positive financial inducements to encourage states to work towards certain national goals.