Big Mac Index
 
 
 
  • Economist's Big Mac Index was invented in 1986 to "make exchange-rate theory more digestible"
  • Burgernomics is based on the theory of purchasing-power parity (notion that a dollar should buy the same amount of goods in all countries)
  • Big Mac is produced locally using roughly the same ingredients in 118 countries
  • Comparing actual exchange rates with the Big Mac Index indicates whether a currency is undervalued or overvalued
  • According to the April 24, 2003 Big Mac Index, the Australian dollar is the most undervalued currency and the Chinese yuan is the most overvalued currency
  • Li Lian Ong of the IMF actually wrote a book about the Big Mac Index, in which she describes the index as being "surprisingly accurate"
(information courtesy of Economist.com)
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