Prelims 2019 · Economy · Question 22
Consider the following statements:<br/>1. Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of the same basket of goods and services in different countries.<br/>2. In terms of PPP dollars, India is the sixth largest economy in the world.<br/><br/>Which of the statements given above is/are correct?
Answer
1 only
1. Correct. PPP exchange rates are estimated by comparing the prices of an equivalent basket of goods and services across countries; this is the core idea of PPP.
2. Incorrect. In PPP terms, India has been among the top three economies globally (after China and the USA), not the sixth largest.
Therefore, only statement 1 is correct.