While researchers say more formal teaching is needed, eight in 10 high school seniors have a basic understanding of economics, according to a new national economics assessment.

"The Nation's Report Card: Economics 2006," the first-ever evaluation on economics conducted by the National Assessment of Educational Progress, also found 42 percent of 12th graders performed at the proficient level, and 3 percent showed advanced knowledge of economic principles. The NAEP is a part of the National Center for Education Statistics of the U.S. Department of Education.

"While we're pleased to see that 42 percent are proficient and roughly 80 percent have a basic understanding, there's plenty of room for improvement," said Charles Smith, executive director of the National Assessment Governing Board, the independent, bi-partisan panel that oversees the NAEP. Smith noted that recent evaluations of students' math skills showed much lower levels of proficiency.

The assessment asked students a variety of questions based on market economy (commonly called microeconomics), national economy (macroeconomics) and international economy. Although not specified as a separate category, students were assessed on their knowledge of entrepreneurship  in the market economy portion of the exam.

For example, one question asked what would be the effect on a lawnmowing business of buying more lawnmowers. More than 50 percent of students provided the correct answer that output, costs, and revenue would all increase.

Overall, students scored higher on questions related to practical application of economics rather than those based on economic theory. "Our review of the assessment results showed that students did better on the personal finance  portion of the test," Smith said. "What they know about economics is not necessarily what they learn in school."

Practical knowledge is more relevant and therefore more important to teach students, according to Robert Duvall, president and CEO of the National Council on Economic Education, a New York-based non-profit organization.

"Too many people think that economics is what they do at MIT, not what you do when you're making practical decisions in your life," Duvall said. "We've got to do a better job in this country of educating our young people, while they are in school, in this skill set."

While many states do not require students to take economics courses, 87 percent of those who participated in the assessment reported having at least some formal economic instruction.

Since this is the first assessment of its kind, it is hard to judge what the results mean for economics knowledge and education, according to Smith. Another evaluation scheduled for 2012 will start to track trends and break down the data by state. Smith said he would be surprised if scores did not improve the second time around.

"We're not starting from ground zero," Duvall agreed. "We've got something to build on there."