to find out what you're worth and what they will need to pay you, no don't exaggerate because they can call your previous employer and verify your salary, if you lie they will not hire you.
What is the real purpose of this question?
Is it okay to exaggerate higher during an interview? On an application? Why or why not?


to find out what you're worth and what they will need to pay you, no don't exaggerate because they can call your previous employer and verify your salary, if you lie they will not hire you.
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Isn't "what you're worth" subjective though? And the question of "what they need to pay you" can be asked directly (ex. "what are your expectations as far as compensation goes?")
Can a random person really call your company (HR or not) and inquire about your salary? What if you are applying for a job while currently employed at another? Such a call could get you fired for looking elsewhere.

I am curious about this also. I would like to know the rules and common practice is when it comes to these things. You don't want to tell your current employer that you are looking elsewhere for a job, however how does your prospective employer check up on your credentials without talking to your current employer?
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well, every profession has a market value, and this increases with additional skills and years on the job.
of course you can tell them your salary requirements, but employers figure if you made X amount at your previous employer they can hire you for X + 10% (just an example).
you can tell them you don't want them to contact your current employer, especially if you're still employee there and looking for a new job, but yes it's called an employment verification, they ask your dates of employment, position/title, and salary.
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I hate that freaking question too....its private IMHO. If its not a required data field, then I leave it blank. If its required I put in the exact past salary.