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Federalism primarily refers to a system of governance in which power is distributed among different levels of government, typically at the national, state, and local levels. This concept emphasizes the ability of multiple governmental entities to coexist and operate simultaneously, allowing for a division of responsibilities and authority. In a federal system, each level of government has its own distinct powers and areas of jurisdiction, which enables local governments to address regional needs while the national government can focus on broader national concerns.

This distribution of power is essential for balancing governance, promoting local autonomy, and ensuring that citizens have access to decision-making processes that are more relevant to their immediate circumstances. In the context of the United States, for example, the Constitution outlines the powers of the federal government while reserving other powers to the states, thereby creating a cooperative relationship among different governmental tiers.

The other options do not accurately reflect the core principle of federalism. For instance, suggesting that power is held exclusively by the national government undermines the very essence of federalism, which is characterized by shared governance. Concentrating power solely at the state level overlooks the necessary balance that federalism intends to achieve. Saying that power is shared equally among all citizens fails to recognize the structured nature of government authority and responsibility arranged in different