What Is the Big Mac Index?
The index compares one burger's price across countries to see whether exchange rates look too high or too low.
Video coming soon. The lesson video will appear here once it is published on YouTube.
Check yourself: sample questions
Think about each question, pick what you would answer if you like, then select “Show answer” to see the solution and why. Nothing is graded or sent to us. Example numbers are worked examples, not predictions.
1.What does the Big Mac Index compare?
The index compares one burger's price across countries to see whether exchange rates look too high or too low.
2.What does the law of one price say?
If a thing were cheaper in one place, traders could buy it there and sell where it costs more, until the gap closes (Fed St. Louis).
3.What does purchasing power parity say?
Stretching the law of one price from one product to all prices gives purchasing power parity.
Full course: 5 more questions for this lesson
The full course unlocks all self-check questions of all 365 lessons, the daily plan, your progress and the printable learning record. Lessons 1 to 7 are completely free.
See the full course Start the free week
Already bought? Open the course on this device
Sources (2)
- Michael R. Pakko, Patricia S. Pollard: Burgernomics: A Big Mac Guide to Purchasing Power Parity. Federal Reserve Bank of St. Louis Review, November/December 2003, Vol. 85, No. 6, S. 9-27
- Eigene Berechnung (synthetisches Zwei-Laender-Beispiel, Python)
Education only. Not financial advice.