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?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
Correct answer
Explanation
The correct answer is A, 1 only. Statement 1 is the definition of purchasing power parity, while statement 2 understates India's position. A PPP exchange rate is the rate at which the currency of one country would have to be converted into that of another to buy the same basket of goods and services in both. It is found by comparing the prices of an identical basket across countries, mainly through the World Bank's International Comparison Program. Because prices of many goods and services are lower in India than in rich countries, India's GDP measured in PPP dollars is far larger than its GDP at market exchange rates. On that basis India has been the third largest economy in the world for years, after China and the United States, not the sixth. So statement 2 was wrong when the question was asked and remains wrong. Option B is wrong because statement 2 is false. Option C is wrong for the same reason. Option D is wrong because statement 1 is correct. Exam tip: PPP compares the cost of the same basket; by PPP the top three are China, the USA and India.
Practice Questions
View allAmong the agricultural commodities imported by India, which one of the following accounts for the highest imports in terms of value in the last five years?
- A.Spices
- B.Fresh fruits
- C.Pulses
- D.Vegetable oils
Show answer
Edible vegetable oils are India's largest agricultural import by value, and they have stayed at the top since well before this question was set.
Read the full explanation →'Broad-based Trade and Investment Agreement (BTIA)' is sometimes seen in the news in the context of negotiations held between India and
- A.European Union
- B.Gulf Cooperation Council
- C.Organization for Economic Cooperation and Development
- D.Shanghai Cooperation Organization
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The Broad-based Trade and Investment Agreement was the name given to the free trade agreement that India and the European Union began negotiating in 2007.
Read the full explanation →What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)'? 1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India. 2. It will drastically reduce the 'Current Account Deficit' of India and will enable it to increase its foreign exchange reserves. 3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future. Select the correct answer using the code given below :
- A.1 only
- B.2 and 3 only
- C.1 and 3 only
- D.1, 2 and 3
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The main and certain advantage of GST is that it subsumes many indirect taxes into one and creates a common national market.
Read the full explanation →Which one of the following is not a strategy in the Rainfed Area Development (RAD) scheme of India?
- A.Diversified farming
- B.Soil health management
- C.Adaptation of cluster-based approaches
- D.Optimizing canal irrigation
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Rainfed Area Development is meant for farms that depend on rain, not on canals, so improving canal irrigation is not one of its strategies.
Read the full explanation →In economics, if a diagram has a line passing through the origin and has 45° angle with either axis and it is asserted that along the line X = Y, what is tacitly assumed?
- A.Both variables are pure numbers.
- B.Both variables are in the same unit.
- C.Both variables are in different units.
- D.At least one variable is a pure number.
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A line through the origin at 45° to each axis joins all the points where the distance along the horizontal axis equals the distance along the vertical axis.
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