JULES (repeating) Royale with Cheese. What'd they call a Big Mac?
The Economist's Big Mac index offers a crude estimate of how far exchange rates are from PPP.
The top chart shows a strong positive relationship between the dollar price of a Big Mac and GDP per person.
The Chinese yuan, for example, is 44% undervalued against the dollar according to our baseline Big Mac index, but only 7% according to the adjusted one.
The Economist's Big Mac index was devised as a lighthearted gauge to whether currencies are under - or overvalued, but it can also be used to cross-check official inflation rates.
For more on the Big Mac index see article.
The Big Mac index was never intended as a precise forecasting tool.
Studies suggest that the Big Mac index fairly closely tracks the purchasing-power-parity rates calculated by more sophisticated methods.
At current exchange rates a Big Mac, which sells for 4.33 dollor in America, costs just 2.29 dollor (75 roubles) in Russia, whereas in Brazil it sells for a sliver under 5 (10 reais) dollor.
The famous Big Mac index is based on this.
These two stand out as emerging-market currencies that trade well above their Big Mac PPPs.
It is so standardised that The Economist of London publishes an annual Big Mac Index to demonstrate the relative purchasing power of various currencies.
The Big Mac Index is based on the theory of purchasing-power parity (PPP), which says that exchange rates should move to make the price of a basket of goods the same in each country.
But the Big Mac index suggested that the euro was already overvalued.
Big Mac price differences were even more pronounced in Shanghai: the full range of burger prices across China (10.5-15 yuan) could be found within that one province.
I want a Big Mac and small fries.
The exchange rate that leaves a Big Mac costing the same in dollars everywhere is our fair-value yardstick.
So come into McDonald's and enjoy a Big Mac Sandwich.
Building a brand identity for gap blue jeans and T-shirts every bit as strong as that of McDonald's Big Mac has been the key to Drexler's success, and last year, he outdid himself.
Meanwhile, on May 17th, McDonald's hosted a special ceremony in Fond Du Lac, Wisconsin, to celebrate a customer consuming his 25, 000th Big Mac.
'Big Mac' is McDonald's best-known trademark.
Some economists think the Big Mac index has been surprisingly accurate in predicting long-run movements in exchange rates.
Carrie once threw a Big Mac at Big, so throwing things have been all the rage ever since, right?
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