ith Washington considering whether to strengthen Social Security by giving Americans more responsibility for their own retirements, a survey released yesterday suggested that the typical American does not know enough about economics to prosper in such a system.

The survey, conducted by Harris Interactive, found, for example, that about half of American adults did not know that if they kept their money at home, in cash, they were at greater risk of losing ground to inflation than if they invested it elsewhere.

"Given recent signs that inflation might be increasing, this is quite a frightening finding," said Alan B. Krueger, an economics professor at Princeton University who served as chief economist for the National Council on Economic Education, a business group that commissioned the survey.

The survey of 3,512 adults and 2,242 high school students also suggested that the intense attention Americans have paid to the pronouncements of the Federal Reserve chairman, Alan Greenspan, in the last few years had done little to help people grasp the role of interest rates. One-third of adults were unable to explain how falling interest rates would affect business.

Young people - those the current Social Security proposals are intended to help the most - performed more poorly on the survey's questions than adults. Barely half of the high school students polled could correctly state the role of the stock market in the economy, with a few choosing the option that it makes stock prices rise.

Fewer than half the students could accurately define the term "budget deficit." And there was confusion about the purpose of mutual funds, with some students stating that they provided higher returns than individual stocks, and others stating that they guaranteed a steadier income. Only 15 percent of students understood that the purpose of mutual funds was to provide diversification.

Mr. Krueger, who contributes a column for the business section of The New York Times, said these findings were disturbing, given the big increase in the number of households that hold stocks and mutual funds.

"Many Americans are potentially open to scams because they don't understand the purpose of the financial markets," he said yesterday.

Other analysts said they thought that the findings added to a growing body of evidence that the typical American is poorly equipped to take advantage of what proponents call the ownership society: a future in which individuals are free to invest their own retirement money, rather than having to accept the returns offered by the Social Security program or a group retirement program at work, like a pension plan. Many surveys have shown the public has doubts about the Social Security program, with young people, in particular, confident that they could do better by investing on their own.

Yet even their concern is poorly informed, according to the Employee Benefits Research Institute, a nonpartisan research organization that is financed by companies and labor unions. The institute's own research showed that fewer than 20 percent of workers thought that Social Security would be their primary source of income in retirement, even though Social Security is currently the primary income source for more than two-thirds of retirees.

"It is abundantly clear that there are a large number of Americans who are completely unprepared to make these decisions," said Steve Blakely, the institute's editor and communications director.

Mr. Blakely said the institute's own research on financial literacy measures the public's understanding of economics differently from the economic education council's survey, but shows a similarly low level of understanding. The institute has found that fewer than 40 percent of American adults have ever tried to live on a budget, for instance, and that large numbers of Americans cannot tell the difference between a stock and a bond. Even though the Social Security Administration sends all participating workers individual annual statements, the institute found that only 18 percent of Americans know at what age they will be eligible to retire with full benefits.

The purpose of the National Council on Economic Education is to raise the public's understanding of the economy. It created a basic standard for high school level financial literacy in 1997 and conducted its first survey in 1999. The economic literacy of both students and adults has improved since then, but only slightly.