UPSC Prelims 2019 · Question 22 of 99
UPSC Prelims 2019 question on Purchasing Power Parity
- ExamUPSC CSE
- Year2019
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicImportant Economic Concepts
- DifficultyEasy
- TypeStatement
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 statement given above is/are correct?
Show answer
Answer: A. 1 only
Verdict
Correct statement: 1 only → Option (a).
Statement by statement
Statement 1 – CORRECT: In purchasing power parity (PPP) exchange rate — the rate at which the currency of one country would have to be converted into that of another country to buy the same amount of goods and services in each country. For example, if a burger is selling in India for Rs100 and in New York for $2, this would imply a PPP exchange rate of 1 dollar to Rs 50.
Statement 2 – INCORRECT: On the PPP basis, China is world's largest economy in 2018. Total wealth of china is estimated at 25.3 trillion international dollar. India is not the sixth largest economy on PPP basis; it is actually among the top 3 economies on PPP basis.