Question

Considering the following statements:

1. Purchasing Power Parity (PPP) exchange rates are calculated by the prices of the same basket of goods and services in different countries.

2. In terms of PPP dollars, India is the sixth largest economy in the world.

Which of the statements given above is/ are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer 1

Correct option is (a) 1 only

PPP: Hypothetical concept that tries to compare two currencies' exchange rate through their purchasing power in respective countries. So, 1 is right.

2014-April, Economic Times: India displaces Japan to become third-largest world economy in terms of PPP: World Bank. So 2 is wrong.