The Need for Economic Literacy

First United Security Bank By First United Security Bank
on November 07, 2011 at 9:52 AM

by Dr. Wayne Curtis: All of us play multiple roles--consumers, producers, workers, and investors—in our economy. This underscores the need to be economically literate to understand the world in which we live and to make better decisions.
How economically literate are you? To determine your knowledge of economics, you can review the following questions that have been used in various surveys to determine literacy.
The first question relates to the Federal Reserve (Fed). Is the Fed responsible for monetary policy and the money supply, for printing money, or for keeping people out of debt?
Many food items have increased in price recently. Is the price of beef determined by government, business monopolies, or supply and demand?
The purchasing power of our income is important to each of us. Is purchasing power most affected by the trade deficit, the rate of inflation, or the balance of payments?
Economic growth is vital to our well-being as a nation. Is economic growth measured by the money supply, the consumer price index, or gross domestic product (GDP)?
Inflation is perhaps the cruelest of taxes. Which of the following is used to measure inflation: the prime interest rate, the consumer price index, or the index of leading economic indicators?
Let’s review the answers to the questions. The Fed is responsible for monetary policy and the money supply. The price of meat is determined by the interaction between supply and demand. Purchasing power of the dollar is affected by the rate of inflation.
Economic growth occurs when GDP increases. And, last, inflation is measured by the consumer price index.
The fifteen-question test from which the above were taken has been administered over the years to a representative sample of the public, high school seniors, and college seniors. Overall, the three groups averaged, respectively, 40.7 percent, 37.1 percent, and 54.4 percent correct responses.
The results highlight the need for better economic education.