federalism (Federal system of Government), each level of Government has sovereignty in some areas
and shares powers in other areas. For example, both the federal (national)and
state Governments have the power to tax. Only the federal Government can declare war. The Army and police are employed and paid by the national Government.
Central banks are in the hands of the National Government who then through the constitution supports the state Governments financially, by supplimenting the taxes collected by them.