Campaign for Economic Literacy

Council for Economic Education Standards in Economics: Survey of Students and the Public

Contents

• Introduction
  • Survey Method
  • Project Responsibility and Acknowledgments
• Executive Summary
• Major Findings
1. Interest in and Perceived Importance of Economics
2. Economics and the Consumer
3. Factors Pertaining to Production
4. Money, Interest Rates and Inflation
5. Government and Trade in Economics
6. Test Scores of the General Public
7. Test Scores for Students

Introduction	top

The survey was designed to evaluate adult and student understanding of the Voluntary National Content Standards in Economics, developed and published by the Council for Economic Education. More specifically, the purpose of the survey was to examine adult and student familiarity with basic economic principles, knowledge about the U.S. economy, and understanding of some key economic terms. In addition, the survey assessed interest in economics and perceived importance of understanding basic concepts in economics.

Survey Method	top

Louis Harris & Associates, Inc. completed 1,010 telephone interviews with a national cross-section of adults 18 years of age or older. Interviews of the public averaged 10 minutes in length and were conducted from Harris' facilities in Youngstown, OH, between January 22, 1999 and February 3, 1999.

A nationally representative sample of 1,085 students in grades 9 through 12 were surveyed during an English class using a self-administered questionnaire. Interviews averaged fifteen minutes in length and were conducted between January 26, 1999 and March 4, 1999.

Project Responsibility and Acknowledgments	top

The Harris team responsible for the design and analysis of the survey includes Katherine Binns, Senior Vice President and Stacey Amorosi, Senior Research Associate. Louis Harris & Associates gratefully acknowledges the contributions to this survey made by our colleagues at the Council for Economic Education. Special thanks go to Joseph Peri for his assistance and expert advice in designing this survey.

Louis Harris & Associates, Inc. is responsible for final determination of the topics, question wording, collection of data, analysis and interpretation in this report.

Executive Summary	top

Virtually every American adult believes that basic economics should be taught in school, and that it is important for the people of the United States to understand economics. Furthermore, most Americans are interested in economics. In spite of the interest in and importance placed on understanding economics, half of all American adults and two out of three American high school students get a failing grade when tested on their understanding of the Voluntary National Content Standards in Economics, developed and published by the Council for Economic Education.

On average, adults get a grade of 57% for their knowledge of basic economics. Adults who have completed college score dramatically higher than those who have not, with the majority receiving a grade of C or better. Working adults score higher than non-working adults, males score higher than females, and whites score higher than blacks or Hispanics.

High school students across America receive an average grade of 48% for their understanding of the basic economic concepts embodied in the Standards. However, twelfth graders, who are more likely to have been taught economics in school, score higher than students in the lower grades and as well as adults. Students who usually receive A's score higher than those who do not, students who have been taught economics in school score higher than those who have not, and students who have at least one college-educated parent score higher than those who do not.

In spite of the low scores, most students and adults demonstrate that they understand the economic principles that have the greatest impact on their daily lives, such as the most common source of personal income and the factors to consider when making purchasing decisions. A majority of students and adults understand the relationship between price and quantity demanded and the effect an increase in demand has on price. They also recognize that international trade benefits all participating countries.

Adults have a much better grasp of the Standards dealing with the supply-side of economics than students do. For instance, adults are more likely to be familiar with the definition of entrepreneur, the determinants of production and the methods used to accelerate innovation. Adults are also much more likely to understand who benefits and who does not when free trade is limited.

Students and adults alike lack a basic understanding of scarcity, money and inflation, with fewer than half demonstrating knowledge of these issues. A majority of adults and students do not understand the implications of government-established price ceilings or who benefits from government-supplied goods and services. Many are also unfamiliar with the definitions of the gross domestic product and a budget deficit.

While there is a long way to go to achieving a desirable level of economic literacy in America, there is more reason for hope than despair. Americans are receptive to economic education. And, economic education appears to make a real difference in people's understanding of basic economics. The challenge ahead, therefore, lies in educating more of America's students about economics so that they will be equipped with a set of skills essential for life in the 21st century.

Major Findings	top

I. Interest in and Perceived Importance of Economics

A majority of American adults is interested in politics, business or finance, and economics. High school students are more likely to be interested in natural history or science than economics or domestic or international politics.

• More than seven in ten adults are either very or somewhat interested in domestic or international politics (71%), business or finance (76%), and economics (74%).
• Half (53%) of all high school students are either very or somewhat interested in economics. Two out of three (68%) students are interested in natural history or science and two out of five (41%) are interested in domestic or international politics.

Among adults, level of interest in economics varies by age, education, and political philosophy. Among students, interest in economics varies by academic achievement and by exposure to economics in school.

• Adults aged 35 through 49 (81%) are the most likely to be interested in economics, and those over the age of 64 (67%) are the least likely to be interested in economics.
• Adults with at least some college are more likely than those without to express an interest in economics (80% some college and 84% college graduate or more vs. 67% high school graduate or less).
• Adults who ascribe to a conservative political philosophy are more likely to be interested in economics than their liberal counterparts (81% vs. 69%).
• Students who receive higher grades in school are more likely to be interested in economics than students who usually receive average or poor grades (54% mostly A's and 59% mostly As and B's vs. 46% mostly B's and C's and 29% worse than C).
• Students who have been taught economics in school are more likely to be interested in it than those who have not (57% vs. 46%).
  

Adults and students alike place a higher importance on politicians having a good understanding of economics than they do on the people of the United States having such an understanding.

• Nearly nine in ten (88%) adults and seven in ten (70%) students feel that it is very important for politicians to have a good understanding of economics.
• Two out of three (64%) adults and half (48%) of all students feel that it is very important for the people of the United States to have a good understanding of economics.
• Students who have been taught economics are more likely than those who have not to believe that it is very important for politicians (74% vs. 65%) and the public (53% vs. 42%) to understand economics.

Nearly all adults believe basic economics should be included in high school education. However, two in five high school students do not receive economics as part of their schooling.

• Ninety-six percent of American adults believe that basic economics should be included in high school education.
• Two in five (40%) American high school students have not been taught economics in school.
• Twelfth graders are significantly more likely than students in grades 9 through 11 to have been taught economics (82% grade 12 vs. 59% grade 9, 42% grade 10, and 57% grade 11).

II. Economics and the Consumer

A majority of students and adults demonstrate that they understand the economic principles that have the greatest impact on their daily lives.

• Nine out of ten (89%) adults and eight out of ten (82%) high school students know that for most people the largest portion of personal income comes from wages and salaries from their jobs.
• When deciding which of two items to purchase, 86% of adults and 74% of high school students recognize that one should choose an item after comparing the costs and benefits of both items rather than simply choosing the item that costs less or the item with the greatest benefits.
• Two out of three (66%) adults and just over half (54%) of all high school students are aware that when a person rents an apartment both the person renting and the landlord benefit from the transaction.

A majority of American adults is aware of the inverse relationship between the price of a product and consumer demand for that product. However, students are even more likely than adults to understand the impact a change in price will have on quantity demanded.

• If the price of beef doubled and the price of poultry remained the same, three in five (58%) adults know that people would most likely buy more poultry and less beef. One in four (27%) would not foresee a change in the quantity demanded of poultry or beef in spite of this change in price.
• More students than adults (80% vs. 58%) know that if the price of beef doubled and the price of poultry remained the same people would most likely buy more poultry and less beef.

Six in ten students compared with seven in ten adults understand that in the short run an increase in demand will result in higher prices.

• When told that "XYZ" manufacturers cannot increase production and demand for their winter sportswear continues to increase, seven in ten (72%) adults understand that the price of "XYZ" winter sportswear will increase.
• Three in five (58%) students know that the price of "XYZ" winter sportswear will increase if the manufacturers cannot increase production and demand continues to increase.

III. Factors Pertaining to Production

Students are much less likely than adults to be familiar with the definition of an entrepreneur, but just as likely to understand the concept of scarcity.

• Three out of four (76%) American adults, compared with three out of five (58%) high school students, are aware that a person who starts a business to produce a new product in the marketplace is known as an entrepreneur.
• One in four (26%) students does not know whether someone who starts a business to produce a new product in the marketplace is a manager, a bureaucrat or an entrepreneur.
• Only a small proportion of adults (37%) and students (41%) understand the concept of scarcity.
• Approximately two out of five adults (37%) and students (41%) understand that since the resources used in the production of goods and services are limited, society must make choices about how to use them.

Students are less likely than adults to know who in the United States determines what goods and services will be produced or what steps can be taken to accelerate innovation.

• Three in five (61%) adults and half (48%) of all students understand that in the United States it is a combination of consumers, producers and government that determines what goods and services should be produced.
• Seven in ten (71%) adults understand that investing in more research and development, and not taxing inventions or increasing government regulation, would most likely accelerate innovation.
• Only two in five (41%) students understand that innovation would most likely be accelerated by investing in more research and development.

Students and adults alike understand the effect of competition on prices but are uncertain of its effect on quality.

• Approximately one-third of the adult (34%) and student (38%) populations realize that an increase in the number of fast-food restaurants in a community would most likely result in lower prices and higher quality.
• Nearly as many adults (35%) and students (30%) believe that an increase in the number of fast-food restaurants would most likely result in lower prices and lower quality.

IV. Money, Interest Rates and Inflation

Adults and students are not familiar with the various functions of money.

• When presented with several statements about the function of money, fewer than two in five adults and students accurately identify the function that is false.
• Fewer than two out of five adults (37%) and students (36%) recognize that the statement "money holds its value well in times of inflation" is incorrect.

Relatively few adults and students understand that the stock market is an example of an institution that exists within a market economy to bring buyers and sellers together.

• Half (52%) of all adults know that the existence of the stock market brings people who want to buy stocks together with those who want to sell stocks.
• Students are much less likely than adults (38% vs. 52%) to understand that the existence of the stock market helps buyers and sellers find each other.

Fewer students than adults understand that there is a direct relationship between the interest rates charged by banks and the amount people save.

• Three out of five (59%) adults and two out of five (43%) students know that an increase from 5% to 8% in the interest rates charged by banks would most likely encourage people to save money.
• A sizable number (35%) of students admit that they simply do not know what the effect of an increase in interest rates would be.

A majority of adults and students alike do not fully understand the concept of inflation, with most being unsure of who benefits during times of inflation.

• Only one in three (36%) adults recognizes that people who borrowed money at a fixed rate of interest are most likely to be helped by inflation. A similar proportion (32%) believes it is the banks that loaned money at a fixed rate of interest that benefit.
• Only one in five (19%) students understands that people who borrowed money at a fixed rate of interest are most likely to be helped by inflation. A majority (54%) of students responded "don't know."

V. Government and Trade in Economics

A larger proportion of students than adults understand that when countries engage in voluntary trade all parties involved benefit. Adults, however, are more likely to understand that trade sanctions benefit producers and not consumers.

• Nearly eight in ten (78%) students and seven in ten (70%) adults are aware that if two countries voluntarily trade goods and services, both countries benefit from the trade.
• Four out of five (80%) American adults, compared with three out of five (58%) students, understand that if the United States were to stop importing automobiles from other countries, U.S. automobile manufacturers and not U.S. consumers would be most likely to benefit.

A plurality of students and adults accurately assess the impact a price ceiling has on supply.

• Forty-five percent of American adults and forty-one percent of high school students understand that there will be fewer apartments available than people want to rent if a city government sets a maximum amount landlords can charge in rent.
• A third of all students (34%) says that they don't know" what would happen if city government set a maximum amount landlords could charge in rent.

Only one-third of adults and students understand that government supplied products and services usually benefit more than one person at a time.

• One in three adults (36%) and students (33%) understand that government supplied products and services benefit more than one person at a time whether they have paid for them or not.
• One in four (28%) American adults believes that when governments supply products and services, business benefits at the expense of consumers.

Many Americans are not familiar with the definitions of the gross domestic product or a budget deficit.

• Only three in ten (29%) adults and two in ten (21%) students know that if the gross domestic product of the United States has increased but the production of goods has remained the same, then the production of services has increased.
• Just over half (54%) of the adult population knows that when the federal government's expenditures for a year are greater than its revenue for that year, there is a budget deficit. Only one in four (23%) high school students is familiar with this definition.
• A sizable number of adults (22%) and students (25%) confuse the definition of a budget deficit with the national debt.

VI. Test Scores of the General Public

Half of all American adults receive a failing grade for their knowledge of basic economic concepts. Adults who have completed college score dramatically higher than those who have not.

• On average, American adults get a grade of 57% for their knowledge of basic economic concepts.
• Only six percent of adults receive a grade of A, and ten percent receive a grade of B.
• Three out of five (60%) college-educated Americans score C or better while only three in ten (32%) adults with some college and fewer than two in ten (17%) adults with a high school education or less do the same.
• Working Americans score higher than non-working Americans. Just over one in three (36%) working Americans compared to one in five (20%) non-working Americans receive a grade of C or better.
• Men (40%) are more likely than women (22%) and white adults (36%) are more likely than black (13%) and Hispanic (9%) adults to receive a grade of C or better for their understanding of economic concepts.

VII. Test Scores for Students

High school students across America receive an average grade of 48% for their understanding of basic economic principles. Twelfth graders score significantly higher than students in lower grades and receive scores comparable to those of adults.

• Only three percent of students receive a letter grade of A, and seven percent receive a letter grade of B.
• Two out of five (39%) twelfth graders receive a C or better. No more than one in five students in the lower grades do the same (14% grade 9, 12% grade 10, and 24% grade 11).
• Seniors receive the same average score as adults (58% vs. 57%) and are more likely than adults (39% vs. 30%) to receive at least a C for their understanding of economics.
• Students who usually receive A's in their courses are more likely than other students to receive at least a C for their understanding of basic economics (37% mostly A's vs. 23% mostly A's and B's, 14% mostly B's and C's and 11% worse than C).
• Students who have been taught economics in school (26%) are more likely than those who have not (14%) to get a grade of C or better for their understanding of the Standards in Economics.
• Students who have at least one parent with a college education (30%) are more likely than students who do not have a parent with a college education (15%) to receive a C or better.
• Boys are more likely than girls (25% vs. 17%), and white students are more likely than black and Hispanic students (26% vs. 11% and 14%) to score C or better.

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