Federalism impacts the distribution of power within a country by dividing authority between national and subnational levels of government, such as states or provinces. This system allows for multiple layers of governance, enabling local authorities to manage issues specific to their regions while the national government handles broader responsibilities. Federalism fosters diversity in policy-making by allowing states to experiment with different approaches, leading to innovation and tailored solutions. However, it can also create tensions over jurisdiction, resource allocation, and conflicting laws, making the balance of power a dynamic aspect of governance in federal systems.