Economics · Purchasing Power Parity & National Income
Consider the following statements regarding the principles and practical applications of Purchasing Power Parity (PPP): Statement I: Absolute Purchasing Power Parity (PPP) posits that the exchange rate between two currencies should adjust to equalize the price of an identical basket of goods across different countries. Statement II: In global economic comparisons, India's ranking by GDP adjusted for Purchasing Power Parity (PPP) is significantly higher than its market exchange rate-based ranking, as it accounts for the lower price levels of non-traded goods in India. Which of the above statements is/are correct?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Neither Statement I nor Statement II is correct
- 2Only Statement II is correct
- 3Both Statement I and Statement II are correct✓
- 4Only Statement I is correct
Correct answer
Both Statement I and Statement II are correct
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