Final answer:
The Paper Bag Princess is a work of children's literature that belongs to the feminist fairy tale sub-genre, challenging traditional princess stereotypes.
Step-by-step explanation:
The book The Paper Bag Princess would best be categorized as children's literature, specifically within the sub-genre of feminist fairy tales. It takes a modern twist on traditional fairy tales, by presenting a strong, independent female protagonist who challenges the usual princess stereotypes. While the story does incorporate elements of folktales and could be used in lessons about traditionalist narratives or children's lore, its primary aim is to subvert those conventions. Hence, it stands out as an example of feminist children's literature.