click HERE for the link to The Economist magazine article
my discussion questions are:
What is the theory of Purchasing Power Parity ?
“the notion that in the long run exchange rates should move towards the rate that prices of an identical basket of goods and services (in this case, a burger) in any two countries.”
What was the Big Mac Index criticism ?
“you would expect average burger prices to be cheaper in poor countries than in rich ones because labour costs are lower”
– different Big Macs in different countries
How did they adjust the Index ?
“The relationship between prices and GDP per person may be a better guide to the current fair value of a currency. The adjusted index uses the “line of best fit” between Big Mac prices and GDP per person”