Question

Explain the concept illustrated by the Big Mac index. What is the concept called? What are...

Explain the concept illustrated by the Big Mac index. What is the concept called? What are thw two forms of? What is the rationale of?

Homework Answers

Answer #1

The Big Mac index, also known as Big Mac PPP, is a survey done by The Economist magazine that is used to measure the purchasing power parity (PPP) between nations, using the price of a McDonald's Big Mac as the benchmark.
THE Big Mac index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their “correct” level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries.

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