Wiktionary
n. Knowledge of and ability to discuss the history of and major concepts underlying a culture, particularly one's own and those of one's peers.
Wikipedia
Cultural literacy is a term coined by E. D. Hirsch , referring to the ability to understand and participate fluently in a given culture. Cultural literacy is an analogy to literacy proper (the ability to read and write letters). A literate reader knows the object-language's alphabet, grammar, and a sufficient set of vocabulary; a culturally literate person knows a given culture's signs and symbols, including its language, particular dialectic, stories, entertainment, idioms, idiosyncrasies, and so on. The culturally literate person is able to talk to and understand others of that culture with fluency, while the culturally illiterate person fails to understand culturally-conditioned allusions, references to past events, idiomatic expressions, jokes, names, places, etc.
Usage examples of "cultural literacy".
Hirsch's Cultural Literacy test, or Allan Bloom's The Closing of the American Mind, two books surprisingly on the bestseller lists.
At best, I'm answer B on question one hundred ninety of someone's cultural literacy test.