The "Big Mac Index"
The Big Mac Index, introduced by The Economist in 1986, is a lighthearted guide to comparing the purchasing power parity (PPP) between two currencies based on the price of a Big Mac hamburger in different countries. What is the Big Mac Index? The Big Mac Index uses the price of a McDonald's Big Mac as a benchmark to measure the purchasing power parity (PPP) between nations. The idea is that a Big Mac is a standardized product that is sold in many countries, making it a convenient proxy for comparing the cost of goods and services across different economies. How Does It Work? Price Comparison : The index compares the price of a Big Mac in various countries, converted into a common currency (usually the US dollar). Purchasing Power Parity (PPP) : If the price of a Big Mac, when converted to US dollars, is higher in one country than in the US, that country's currency is considered overvalued compared to the dollar. Conversely, if the price is lower, the currency is considered un...
