[Infographic] The Big Mac Index
According to The Economist, “bugernomics” is “a lighthearted attempt to gauge how far currencies are from their fair value. It is based on the theory of purchasing-power parity (PPP), which argues that in the long run exchange rates should move to equalise the price of an identical basket of goods between two countries. Our basket consists of a single item, a McDonald’s Big Mac hamburger, produced in nearly 120 countries. The fair-value benchmark is the exchange rate that leaves burgers costing the same in America as elsewhere.”
The folks at FoodBeast.com explain the idea this way: “McDonald’s Big Mac is such a well known item across the planet that it can be used as a global standard of determining purchasing power between two currencies by comparing the cost of the Mickey D’s burger between any two countries.”
Hmmmm, sounds pretty ‘Fish-o-Filet’ to us, but you’ll have to be the judge. The infographic we feature here today, provided by Online MBA Blog, does a great job of demystifying the index and explaining it’s use.
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