What is the Big Mac Index?
Q: What is the Big Mac Index?
A: The Big Mac Index is an economic index that compares the purchasing power of two currencies by looking at how expensive a Big Mac is in different countries.
Q: When was the Big Mac Index first written about?
A: The Big Mac Index was first written about in The Economist magazine in September 1986.
Q: Why was the McDonald's Big Mac chosen for the Big Mac Index?
A: The McDonald's Big Mac was chosen because it is made in a similar way with similar ingredients in many countries around the world.
Q: How is the exchange rate between two countries compared using the Big Mac Index?
A: The exchange rate between two countries is compared by dividing the price of a Big Mac in one country (in its currency) by the price of a Big Mac in another country (in its currency).
Q: What is the significance of the Big Mac Index in relation to purchasing power parity theory?
A: According to purchasing power parity (PPP) theory, the first currency is under-valued compared with the second currency if the value obtained by dividing the price of a Big Mac in one country (in its currency) by the price of a Big Mac in another country (in its currency) is lower than the actual exchange rate. Conversely, if the value obtained is higher than the actual exchange rate, then the first currency is over-valued.
Q: When is the Big Mac Index published?
A: They have published the index each year since it was first written about in September 1986.
Q: What can be said about the exchange rate between two countries if the value obtained from the Big Mac Index is equal to the actual exchange rate?
A: If the value obtained from the Big Mac Index is equal to the actual exchange rate, then there is no discrepancy between the two currencies and they are considered to be fairly valued.
