We're nearing the end of November, which has been Financial Literacy Month in Canada. The Financial Literacy Action Group, a coalition of notfor- profit organizations, describes Financial Literacy Month as "activities and events that highlight the need for increased financial literacy in Canada, as well as the programs, services and tools that help Canadians improve their knowledge, skills and confidence in making the best financial choices for themselves."

It's difficult to understand how to manage your money if you don't have a basic grip on personal finance, as well as public finance. I've used this column in the past to impart financial knowledge that I thought would be useful to other students. This week, I actually want to focus on another important aspect of financial literacy: the ability to read the financial news and understand what is going on in the economy. In other words, public finance. To do this, I'll cover some very basic terms and examples.

Here are a few key terms you might see in newspaper articles on the European debt crisis:

Central bank: A central bank is the government organization that sets monetary policy (described below). In Canada, it's called the Bank of Canada. In the U.S., it's the Federal Reserve (commonly called "the Fed" in the financial media). In the European Union, it's the European Central Bank. Most countries have their own version of a central bank.

Inflation: The rise in prices over a period of time. Inflation tends to go up over time, so that things were far cheaper years ago than they are now. Disinflation is when inflation is still going up, but at a slower than normal rate. Deflation is when prices are actually decreasing. Inflation is something we should be personally concerned with because it erodes our savings as well as our purchasing power.

Purchasing power: The amount you can buy with your money. This goes down as inflation goes up (and vice versa), since inflation makes it so that things cost more than they once did.

Monetary Policy: This is described by the Bank of Canada website as being "concerned with how much money circulates in the economy and what that money is worth." Monetary policy is mainly concerned with inflation and, in Canada, the Bank of Canada controls inflation by changing interest rates it charges to lend money to banks. The target is generally one to three per cent inflation per year.

Fiscal Policy: This is about taxation and how government spending affects the economy. Fiscal policy is mainly set each year when parliament passes its budget. The difference between monetary policy and fiscal policy (besides that the former is controlled by the Bank of Canada the latter by parliament) is that monetary policy deals largely with inflation and fiscal policy largely with taxation.

I hope these definitions help you navigate some of what's being reported lately in the financial news. This stuff is pretty complex and I've definitely only scratched the surface. However, public finance is an incredibly important part of our society, and it will be much better for your wallet if you even just have a basic understanding of what's going on in the financial world.

For more information on Financial Literacy Month, check out financialliteracymonth.ca

Jeremy Wall is studying Professional Financial Services at Fanshawe College. He holds an Honour's Bachelor of Arts from the University of Western Ontario