How can Big Mac help us understand a country's purchasing power?
- Utilizing Purchasing Power Parity or the PPP theory, future exchange rates are predicted based on the worth of products that the respective currencies can purchase.
- Comparing local prices for Big Mac in different regions of the world shows the difference in the PPP, currency, and demand.
- This is where the Big Mac Index comes into play. We use Burgernomics to calculate which currency is undervalued or overvalued.
- We rely on Burgeronomics to work out which foreign currency is currently under-priced or overpriced.
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Countries also use Big Mac burgers as an economic indicator to understand purchasing power.
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