Purchasing Power Parity theory states that exchange rates between currencies adjust to equalize: MCQ with Answer and Explanation

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Purchasing Power Parity theory states that exchange rates between currencies adjust to equalize:

A. government budget deficits

B. interest rates

C. inflation rates only

D. the purchasing power of currencies in terms of goods

Answer: Option D

Solution (By JKSSB Mock Tests)

Purchasing Power Parity says exchange rates adjust so that identical goods cost the same in different currencies.

This question belongs to: Economy GK Economy Set 1

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Question #1

The 'Reserve Bank of India' publishes which report?

A. World Development Report

B. Economic Survey

C. Human Development Report

D. Annual Report and Financial Stability Report

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Correct Answer: Option D

Explanation:
RBI publishes Annual Report and Financial Stability Report.

This question belongs to: Economy GK Economy Set 1

Question #2

The concept of 'Liquidity Trap' is most relevant when:

A. The economy is at full employment with high inflation

B. Interest rates are very high

C. Money demand is interest-inelastic

D. Nominal interest rates are close to zero and money demand is perfectly elastic

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Correct Answer: Option D

Explanation:
In a liquidity trap, the nominal interest rate is at or near zero and further increases in the money supply are absorbed entirely as idle balances, rendering conventional monetary policy ineffective.

This question belongs to: Economy GK Economy Set 1

Question #3

The 'Goods and Services Tax' on veterinary services is:

A. 18%

B. 5%

C. exempt

D. 0%

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Correct Answer: Option C

Explanation:
Veterinary services are exempt from GST.

This question belongs to: Economy GK Economy Set 1

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