Posts Tagged ‘purchasing power parity’

The Big Mac Index and global economics

Tuesday, April 14th, 2009

Juicy juicy Big MacI’ve long been a follower of the Big Mac Index and its poorer (or is that funnier?) cousins like the iPod index. It’s used as a measurement of the Purchasing Power Parity (PPP) of various nations around the world and involves taking the current price of a Big Mac in around 120 countries, a product that should theoretically cost the same everywhere and converting its price to US dollars. What you’ll find is far from parity. Some currencies appear over valued and others under valued. For example the Australian dollar appears to be vastly under valued simply because of the fact that a Big Mac in Australia is a lot cheaper than in the US. Likewise the Euro is overvalued because the average burger there is more expensive there than in the states.

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