Big Mac Index
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Review the Big Mac Index and respond to the following questions:
1. Briefly discuss the history and purpose of the Big Mac Index. Where is it most expensive to buy a Big Mac? Where is it the least expensive to buy a Big Mac?
2. What factors other than currency overvaluation and undervaluation might contribute to these differences?
3. Based on the theory of purchasing power parity, what is likely to happen to these currencies against the dollar in the next few years?
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1. The Big Mac Index was essentially developed by a publication known as The Economist, at or around 1986. The basic purpose of the Big Mac Index is to make the understanding of the theories related to exchange rate much more clear and explainable to economists, and other interested parties. It is most expensive to buy a Big Mac in Norway, and it is least expensive to buy a big Mac in Malaysia, based on their costs in US ...
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