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During February and March 2004, the Hawai`i Council on Economic Education, in cooperation with the Hawaii State Department of Education, conducted a survey to assess the economic and financial literacy of seniors in Hawaii's public high schools. Students were asked to answer 20 multiple-choice questions on a variety of topics central to either microeconomics or macroeconomics. Question topics ranged from the effects of inflation to the functions of money to the definition of an entrepreneur.

Results were compiled from 521 student surveys encompassing 19 public high schools. Schools from each of the seven public school districts were represented in the survey. Teachers distributed, supervised, and collected the survey which students completed in class. By design, the survey was not distributed in economics or consumer education classes, as one of our goals was to gather information on the economic and financial literacy of students who had taken a course in economics or consumer education and those who had not.

Overall, the average score on the exam was 10.7 of 20 questions or 54 percent. An identical survey of adults in the Hawaii labor force conducted in March 2003 by the Hawai`i Council on Economic Education and SMS registered an average score of 11.96 of 20 questions or 59.8 percent. In some respects, this outcome may not be very surprising as age brings forth experience, and the confrontation of economic and financial choices. On the other hand, many of the high school seniors have recently taken an economics course or have taken other courses in which economics concepts and applications have been integrated into the course materials and might reasonably be expected to have learned more about economics and its applications.

When we separate our sample into students who have completed a semester of economics and students who have not, we find that taking a semester of economics marginally improves student performance in our survey. Students completing a semester of economics register an average score of 11.43, while students without a full semester of economics register an average score of 10.26.

Students generally performed better on microeconomic questions than on macroeconomic questions. One particularly surprising result was obtained when respondents were asked: "When the federal government's expenditures for a year are greater than its revenue for that year, the difference is known as …" the budget deficit. The most popular answer (36.7 percent of students surveyed) was that they didn't know the answer, while 21.5 percent answered "the national debt," thereby confusing a "budget deficit" with "the national debt." Perhaps the most unexpected responses were to the question concerning the effects of inflation. Only 22.5 percent of students chose the correct answer ("People who borrowed at a fixed rate of interest are helped by inflation"), while 40.2 percent admitted that they didn't know the answer. The poor results could be due to an imprecise question; a misunderstanding of inflation and its effects; or to students having little first-hand experience with inflation. Today's high school students have grown up during a period of price stability, and inflation may seem like an academic topic until it actually occurs.