Chapter 3: Federalism • Externality is public goods or bads generated as a byproduct of private activity. For example, air pollution is an externality (public bad) because it is, in part, the byproduct of the private activity of driving a car. • Federalism is a system of government in which power is divided between a central government and several regional governments. In the United States the division is between the national government and the states. • Unitary government is a system of government in which a single government unit holds the power to govern the nation (in contrast to a federal system, in which power is shared among many governing units) • Dual Federalism is a system of government in which the federal government and state governments each have mutually exclusive spheres of sovereignty • Shared (or cooperative) Federalism is a system in which the national and state governments share in providing citizens with a set of goods • Nationalization is shifting to the national government responsibilities traditionally
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