Big Mac Index
Big Mac Index
The Big Mac Index is an informal measure of purchasing power parity (PPP) between two currencies. It was introduced by The Economist in 1984 as a semi-humorous illustration of PPP and has been published annually since then. The index also gave rise to the term "burgernomics".
Pronunciation
/bɪɡ mæk ˈɪndɛks/
Etymology
The term "Big Mac Index" is derived from the Big Mac, a hamburger sold by the international fast-food chain McDonald's, and the concept of an index in economics, which is a statistical measure of change in a representative group of individual data points.
Explanation
The Big Mac Index is based on the theory of purchasing power parity (PPP), the notion that in the absence of transaction costs and official trade barriers, identical goods will have the same price in different markets when the prices are expressed in the same currency.
In the case of the Big Mac Index, the "basket" in question is a single Big Mac burger as sold by McDonald's, which is produced in about 120 countries. The Big Mac PPP exchange rate between two countries is obtained by dividing the price of a Big Mac in one country (in its own currency) by the price of a Big Mac in another country (in its own currency). This value is then compared with the actual exchange rate; if it is lower, then the first currency is under-valued (according to PPP theory) compared with the second, and conversely, if it is higher, then the first currency is over-valued.
Related Terms
- Purchasing Power Parity (PPP): An economic theory that compares different countries' currencies through a "basket of goods" approach.
- Exchange Rate: The value of one currency for the purpose of conversion to another.
- McDonald's: An American fast food company, founded in 1940 as a restaurant operated by Richard and Maurice McDonald, in San Bernardino, California, United States.
- Burgernomics: A term derived from the Big Mac Index, used to measure the purchasing power of an economy.
External links
- Medical encyclopedia article on Big Mac Index
- Wikipedia's article - Big Mac Index
This WikiMD article is a stub. You can help make it a full article.
Languages: - East Asian
中文,
日本,
한국어,
South Asian
हिन्दी,
Urdu,
বাংলা,
తెలుగు,
தமிழ்,
ಕನ್ನಡ,
Southeast Asian
Indonesian,
Vietnamese,
Thai,
မြန်မာဘာသာ,
European
español,
Deutsch,
français,
русский,
português do Brasil,
Italian,
polski