Q. Consider the following statements regarding the Rupee Dollar exchange rate in the light of purchasing power parity PPP: Exchange rate of the currencies should be equal to the ratio of price levels in two countries Exchange rate of the currencies should be not equal to the ratio of price levels in the two countries Exchange rate of the currencies should be decided on the basis of value of the third major currency like euro which among the above statements are correct ?
Answer: 1 only is correct
Notes: As per the Purchasing power parity (PPP) is a theory, the exchange rate between two countries should equal the ratio of the price level of a fixed basket of goods and services of the two countries.

5

Above question is part of 10000+ MCQs for UPSC (Prelims) Paper-1 course in GKToday Android app.