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GED Social Studies: Consumer Economics Concepts

Importance ★★★☆☆ · 15% (estimate)

Overview

This chapter covers everyday money topics: credit, saving, banking, and laws that protect borrowers.

Credit cards are revolving credit: you can borrow up to a limit, repay, and borrow again. Car loans and mortgages are installment loans with set payments. Savings accounts earn interest; simple interest equals the principal times the rate times the time.

Bank deposits at insured banks are protected by the FDIC up to $250,000 per depositor, per bank, for each ownership category. The Truth in Lending Act requires lenders to tell borrowers the APR and total finance charge before they sign.

Key concepts

  • Revolving vs. installment

    Revolving credit (credit cards) can be reused up to a limit. Installment loans (car, mortgage) are repaid in set payments.

    Memory tipCredit card = revolving.

  • Simple interest

    Interest = principal x rate x time.

    Memory tip3% for 2 years on $1,000 = $60.

  • FDIC insurance

    Protects deposits at insured banks up to $250,000 per depositor, per bank, for each ownership category.

    Memory tipCovers deposits, not stocks.

    Source: FDIC · as of 2026

  • Truth in Lending Act

    Requires lenders to disclose the APR and total finance charge.

    Memory tipTruth = tell the true cost of credit.

Often tested

  • Interest earned is not the same as the total balance.
  • Different consumer laws cover different things: lending costs, credit reports, and fair treatment.

3 sample questions

Verified practice questions from this unit.

Practice questionReviewedEconomics › Consumer Economics★★★☆☆

Question 1. Which type of credit lets you borrow up to a set limit, pay it back, and borrow again?

  1. ① A savings account
  2. ② A car loan
  3. ③ A credit card
  4. ④ A home mortgage
▼ Show answer and explanation▲ Hide answer and explanation

Answer: ③ A credit card

Key point: Credit card = revolving credit

A credit card is revolving credit: you have a credit limit, and as you pay down the balance you can borrow again. Car loans and mortgages are installment loans with a fixed number of payments.

Wrong choices

  • A savings account: A savings account holds your own money. It is not credit.
  • A car loan: A car loan is an installment loan: you borrow once and repay in set payments.
  • A home mortgage: A mortgage is also an installment loan, used to buy a home.
Practice questionReviewedEconomics › Consumer Economics★★★☆☆

Question 2. You put $1,000 in a savings account that earns 3% simple interest per year. How much interest will you earn in 2 years?

  1. ① $30
  2. ② $60
  3. ③ $600
  4. ④ $1,060
▼ Show answer and explanation▲ Hide answer and explanation

Answer: ② $60

Key point: Simple interest = principal x rate x time

Work it out step by step:

  1. Principal = $1,000, rate = 3% = 0.03, time = 2 years.
  2. Interest = $1,000 x 0.03 x 2 = $60.

Check: $30 per year x 2 years = $60.

Wrong choices

  • $30: $30 is the interest for only 1 year.
  • $600: $600 uses 30% instead of 3%.
  • $1,060: $1,060 is the total balance (deposit plus interest), not the interest alone.
Practice questionReviewedEconomics › Consumer Economics★★★☆☆

Question 3. What does FDIC insurance do for people who keep money in an insured bank?

  1. ① It protects their deposits, up to a limit, if the bank fails
  2. ② It protects them from losing money on stocks
  3. ③ It guarantees that their loan applications will be approved
  4. ④ It sets the interest rate on their savings accounts
▼ Show answer and explanation▲ Hide answer and explanation

Answer: ① It protects their deposits, up to a limit, if the bank fails

Key point: FDIC insures bank deposits up to a limit

The Federal Deposit Insurance Corporation (FDIC) is a U.S. government agency. If an insured bank fails, the FDIC protects deposits up to $250,000 per depositor, per bank, for each type of account ownership. It was created in 1933 during the Great Depression.

Wrong choices

  • It protects them from losing money on stocks: FDIC insurance covers bank deposits, not stock investments.
  • It guarantees that their loan applications will be approved: The FDIC does not approve loans.
  • It sets the interest rate on their savings accounts: Banks set their own savings rates. The FDIC does not set them.
Practice 4 questions from this unit →

AI-written · Verified · Written by AI. Only units that passed a separate AI check (re-reading facts and numbers) are published. Tell us if you find a mistake.