Test Your Economic Literacy
Take the 13-question Minneapolis Federal Reserve economic literacy test here. The national results from 1998 show that for 9 of the 13 questions, fewer than half of respondents selected the correct answer.
CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Friday, June 03, 2011
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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20 Comments:
I scored 100.
I scored 100%. Now will someone offer me a job?
12/13
7/13. True, my English is very weak ...
13 for 13. though I had to parse a couple of the questions and answers before I saw where the answer lay.
i got em all right, even though i dont agree with the questions...
We're in a world of trouble.
We had a few qtrs of decent growth, unemployment fell all the way down to 8.8%, and it started looking like we might pull out of our "crisis." At least, it looked that way to some. A few of us were doubtful. Unfortunately, that "few" seems to have been correct.
By the first of the year gasoline prices started getting pretty high. By the end of Feb gasoline prices were over $3.00, heading to $3.50, and the economy started slowing. By the end of March we were heading for $4.00, and the economy was, for all intents and purposes, at a standstill.
We are now at either flat, or slightly negative growth, and have been for a couple of months. But, here's where it gets scary. Gas Prices have fallen All The Way Back to $3.75, and are showing signs of stabilizing, and possibly heading back up.
Yep, there you have it. The U.S. going into recession has managed to knock the price of gasoline down by a whole $0.25.
Gasoline prices appear to be stabilizing at a higher price than it took to send us sliding back into the mire.
We're in for a long, hard trip, Kiddos.
My mind got to wandering around by the time I got to the Sports question, and I blew it (well, there Are more steelworkers, and farmers than pro athletes, right. :)
"I scored 100%. Now will someone offer me a job"...
Yeah, do you want to clean my apartment?
RE: question 12: 'Which of the following limits an economy's potential output?'...
The answer should've been 'C' but then again who back in '98 thought we elect another round of clowns?
I thought the lighthouse question was a bit deceptive:
Why are private businesses not likely to operate a lighthouse?
A. Ship owners buy insurance policies to protect themselves from losses so they won't pay for lighthouses.
B. The light from the lighthouse can be used even by ships that do not pay a fee for the service."
this implies that SOME ships pay a fee while others do not.
I don't think ANY ships pay a lighthouse fee and instead all of them buy insurance or go bare.
I realize it was an allegory but given the "duh" character of some questions - this one had more of a "gotcha" quality.
and of course, all of them represent a theoretical perspective and in a world where the govt and companies assert themselves ...
for instance, the govt may well put a tax on ships that is used to pay for lighthouses....
a better question in my view would be to ask IF the govt should institute a tax to pay for lighthouses - if it turned out that doing that was cheaper than not doing so... which another question essentially asked.
those are tougher questions.
An economics test from the Federal Reserve??
The test was way too easy, but I had to cheat to get the union question correct and get 13 out of 13.
I was expecting a question such as this: If someone gives you a dollar bill and prints $1 trillion more the next day, how much is your dollar worth in purchasing power now as compared to when you first received it?
" ... and prints $1 trillion more the next day, how much is your dollar worth in purchasing power "
in theory or actual practice?
I would presume that the Fed announces when they pump more money into the economy - but the prices don't rise by a Calculatable amount the next, day or week or much on all products across the board.
If that happened - "printing money" would be a colossal failure.
so when you ask a question like that on a "literacy" test for the average man - he's not going to see a cause and effect.
Only those who know the economic theory would know the answer.
right?
"Only those who know the economic theory would know the answer."
Yes. And it is an economic literacy test. What is more dollars chasing the same amount of goods generally called?
Larry,
It's not actually a test, they really don't know the answers, and are hoping someone will tell them.
This comment has been removed by the author.
"I thought the lighthouse question was a bit deceptive:"
The concept of "free rider" wasn't part of your extensive economic education? I'm surprised. Perhaps you just slept through class that day.
" don't think ANY ships pay a lighthouse fee and instead all of them buy insurance or go bare."
Insurance and light houses aren't direct substitutes. It's not 'one or the other'.
Insurance won't keep you from running onto the rocks at night and sinking with all hands lost, but a lighthouse might.
the "CONCEPT" would have the question worded this way:
"B. The lighthouse would be perceived by many as a free service is the fee was voluntary"
OR
"B. Few, if any ships would voluntarily pay for lighthouse service"
OR
"B. The govt would have to IMPOSE a TAX in order to pay for the lighthouse because businesses and individuals won't voluntarily pay for what they perceive as free".
or... " if the gas tax on fuel was voluntary - how many folks would chose not to pay it"
As I said - the test says it is designed to test economic literacy but much of it is based on economic theory that often manifests itself differently in the real economic world.
If one has taken economics and he recognized the questions were looking for answers to theoretical circumstances....why... he could get 12 out of 13 and get tripped up by the lighthouse question.
A really good question would have been:
Ships queued up to go through the Panama Canal can "jump the line" if they are willing to pay higher tolls.
What economic concept does this represent and why would a ship be VOLUNTARILY willing to pay higher tolls that the minimum?
"the "CONCEPT" would have the question worded this way:"
Only in your world, Larry, Your thinking is muddled as usual.
"B. The govt would have to IMPOSE a TAX in order to pay for the lighthouse because businesses and individuals won't voluntarily pay for what they perceive as free."
This answer is interesting, in that it highlights your elitist assumption that government knows best, and should force people to do things whether they want to or not.
Perhaps if no one wants to pay for a lighthouse, there shouldn't be a lighthouse.
Larry G.
The concept of 'free rider' can only exist in a world where there is choice. In your world, there is none, and everyone pays for everything collectively, whether they benefit or not.
I can understand why you had trouble with that question.
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