What is the Big Mac Index?
A) It is a price index for the top 20 stocks traded internationally.
B) It reflects inflation trends through trade in laptop computers and international price competition.
C) It is an index of the price of McDonald's hamburgers quoted in one currency designed to measure whether absolute PPP holds for Big Macs.
D) It is a measure of unemployment in the service industries of poor nations where Western retailers such as McDonalds have infiltrated.

Question

Quizplus · Accepted Answer

The Big Mac Index is an index created by The Economist magazine in 1986 to measure the purchasing power parity (PPP) between different currencies. It does this by comparing the prices of a Big Mac hamburger in different countries and converting those prices into a common currency (in this case, US dollars). If the prices of Big Macs are the same in different countries, then it suggests that the exchange rates between those currencies are at their PPP values. It is used as a fun and interesting way to understand exchange rates and inflation trends.

What Is the Big Mac Index