March 27 – Economics discussion article – Big Mac Index

 

Mac

 

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”

Resources

How do countries calculate their GDP?

Crazy kid gets McDonald’s receipt tattoo