Question
Consider the following statements:
1. Purchasing power exchange rates are calculated by comparing the price 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:
A
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Explanation:
1. Statement 1 is correct. Purchasing power exchange rates (PPP exchange rates) are calculated by comparing the price of the same basket of goods and services in different countries. It helps in determining the relative value of different currencies based on their purchasing power.
2. Statement 2 is incorrect. In terms of PPP dollars, India is currently the third-largest economy in the world, not the sixth largest. The ranking may vary over time as economies grow or contract.