Official Answer Key & Detailed Solution
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Correct Answer: Option (A) — 1 only
Concept & Option Breakdown
Standard Reference Verified- Statement 1 is correct: Purchasing Power Parity (PPP) calculates exchange rates by comparing the relative price levels of a representative basket of identical goods and services across different nations (Law of One Price).
- Statement 2 is incorrect: In PPP terms, India is the third-largest economy in the world (behind China and the United States), not the sixth largest (it is around 5th in nominal terms).
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