![]() Thus Big Mac Index provides an indication of overvaluation or undervaluation of currencies. Big Mac index enables economists to make exchange rates comparisons and comparisons of relative prices among countries, worldwide. Big Mac PPP is that exchange rate, which makes the price of a hamburger in any country same as that (prevalent) in the USA. In this particular case, a Big Mac replaces that representative consumption basket. It involves the concept of ‘purchasing-power-parity’ in economics. Purchasing power parity (PPP) theory states that ultimately exchange rates between nations should attain a level where an identical consumption basket (comprising goods and services) would display same price in concerned nations. ![]() It was introduced by Economist magazine in 1986.
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