GED Social Studies Consumer Economics Summary
Checked 10/27/26
Consumer Economics: key points
- Simple interest = principal x rate x time.
- Credit cards are revolving credit; car loans and mortgages are installment loans.
- Importance
- ★★★☆☆ (3 / 5)
- Weight
- About 1 of 6 Economics questions (15%)
Types of credit, saving and banking, interest, deposit insurance, and consumer credit laws.
📖 See more Consumer Economics concepts →Consumer Economics: 4 sample questions
Question 1. Which type of credit lets you borrow up to a set limit, pay it back, and borrow again?
- ① A savings account
- ② A car loan
- ③ A credit card
- ④ A home mortgage
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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.
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 $30
- ② $60
- ③ $600
- ④ $1,060
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Answer: ② $60
Key point: Simple interest = principal x rate x time
Work it out step by step:
- Principal = $1,000, rate = 3% = 0.03, time = 2 years.
- 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.
Question 3. What does FDIC insurance do for people who keep money in an insured bank?
- ① It protects their deposits, up to a limit, if the bank fails
- ② It protects them from losing money on stocks
- ③ It guarantees that their loan applications will be approved
- ④ It sets the interest rate on their savings accounts
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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.
Question 4. Which federal law requires lenders to clearly tell borrowers the annual percentage rate (APR) and the total finance charge before they sign a loan?
- ① The Fair Credit Reporting Act
- ② The Sherman Antitrust Act
- ③ The Equal Credit Opportunity Act
- ④ The Truth in Lending Act
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Answer: ④ The Truth in Lending Act
Key point: Truth in Lending Act: lenders must disclose APR and costs
The Truth in Lending Act (1968) requires lenders to clearly disclose the cost of credit, including the APR and total finance charge. This helps consumers compare loans. Other consumer credit laws cover credit reports and fair treatment.
Wrong choices
- The Fair Credit Reporting Act: The Fair Credit Reporting Act deals with credit reports, such as your right to see and correct them.
- The Sherman Antitrust Act: The Sherman Antitrust Act is about monopolies, not consumer loans.
- The Equal Credit Opportunity Act: The Equal Credit Opportunity Act bans discrimination in lending, such as because of race or sex.
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