Last year, while I was fanging around France in an oversized motorhome with way too many kids, the Reserve Bank of Australia (RBA) ran its first ever large-scale survey to test the general public’s understanding of economics, by way of six multiple choice questions.
The results will SHOCK you.
The RBA found that “being male, older, of higher income, having a degree, having studied economics or finance, or being engaged with economic news are associated with higher scores”.
Well, slap me with a seasonally adjusted wet lettuce leaf, Guv’nor!
Then again, my 10-year-old son aced the first five questions. (Admittedly, he’s pretty smart – when I read him bedtime stories he often corrects my pronunciation.)
In fact, he did so well on the RBA quiz that I wondered whether he’d got some financial knowledge via osmosis from his old man.
“Well, the first five questions don’t require any real financial knowledge … it’s just logic”, he said matter-of-factly, “though the final question on the RBA needed technical knowledge that I don’t have.”
No pressure – but let’s see how you go.
Are You Smarter than a 10-Year-Old?
1. As far as you know, during a recession in an economy, there would normally be an increase in:
a) imports
b) unemployment
c) economic growth
d) business spending
2. Say wages in the economy increased by 5 per cent and prices increased by 7 per cent. As far as you know, in terms of the goods and services they can buy, a worker would be:
a) better off
b) worse off
c) neither better nor worse off
3. As far as you know, all else equal, which would usually increase total spending in the economy? An increase in:
a) tax rates
b) consumer caution
c) the savings rate
d) business investment
4. As far as you know, all else equal, a decrease in interest rates provides an incentive for people to:
a) save more and borrow more
b) save less and borrow less
c) save more and borrow less
d) save less and borrow more
5. As far as you know, which monetary policy would the RBA most likely adopt if the economy moved into recession during a period of low inflation?
a) increase income taxes
b) lower the cash rate
c) decrease purchases of government bonds
d) reduce spending on public infrastructure projects
6. As far as you know, what is the Reserve Bank of Australia’s target range for inflation?
(a) 0–1 per cent
(b) 1–2 per cent
(c) 2–3 per cent
(d) 3–4 per cent
(e) 4–5 per cent
(f) 5–6 per cent
(g) 6–7 per cent
(h) 7–8 per cent
(i) 8–9 per cent
(j) 9–10 per cent
(k) don’t know / uncertain
Answers: 1 (b), 2 (b), 3 (d), 4 (d), 5 (b), 6 (c)
And here’s how you did compared to the great unwashed: