The Big Mac Index Uses Burgers To Determine The Value Of Our Money

Fast-food finance

McDonald's Big Mac
The Big Mac From McDonald's. Image McDonald's

Who knew the McDonald’s Big Mac inspired economics? The Big Mac index is burgernomics at its best, created in 1986 by economist Pam Woodall; the term was first introduced somewhat humorously in a report by The Economist magazine.

The index uses the cost of the Big Mac in countries all over the world to determine currency value.

It’s based on the theory of purchasing-power parity (PPP), which indicates that long run exchange rates should equalise the prices of identical goods and services – such as the Big Mac – in any two countries.

 

 

Big Mac

 

A Big Mac is a very standard product so should, therefore, cost the same in every country. When comparing the burger’s prices – economists can also see whether a currency is overvalued or undervalued using the US dollar as a base rate.

There is also a gourmet version of the index for those who prefer the fancier things in life.

This year’s index is out, and it looks like Switzerland claimed the top spot for most expensive Big Mac in the world. Their burgers cost $6.35USD which means the Swiss franc is overvalued by 25.5%. This was also reported back in 2015 by CNN money, when it cost $7.54USD for the classic meal. 

Britain comes in at $3.73USD, so it’s undervalued by 26.3%.

The public opinion of this formulation seems to be mixed, based on the comments.

 

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Loaded staff writer Danielle De La Bastide has lived all over the planet and written for BuzzFeed, Thought Catalog as well as print publications throughout the Caribbean.