Consider the following statements :
- 1.Purchasing Power Parity (PPP) exchange rates are calculated by comparing 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?
Show answer
Answer: A. Statement 1 is correct: PPP exchange rates compare what the same basket of goods and services costs in different countries. Statement 2 is wrong: in PPP terms India is the third largest economy, after China and the USA (it was sixth or seventh by market exchange rates in 2019). So 1 only.
Watch for: India's sixth-place rank by nominal GDP is mixed up with its PPP rank.
Why the other options are wrong
- B. Wrong because India ranks third, not sixth, in PPP terms.
- C. Wrong because statement 2 is false.
- D. Wrong because statement 1 is true.
Source to check: World Bank, International Comparison Program (ICP) and World Development Indicators; IMF World Economic Outlook database (2018)
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.