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The Big Mac Index is published by The Economist as an informal way of measuring thepurchasing power parity (PPP) between

two currencies and provides a test of the extent to which market exchange rates result in goods costing the same in different countries. It "seeks to make [1] exchange-rate theory a bit more digestible". The index takes its name from the Big Mac, a hamburger sold at McDonald's restaurants.
Contents
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1 Overview

o o o o    

1.1 Variants 1.2 Limitations 1.3 Manipulation 1.4 Comparison issues

2 Figures 3 See also 4 Notes 5 External links

[edit]Overview The Big Mac index was introduced in The Economist in September 1986 by Pam Woodall as a semihumorous illustration and has been published by that paper annually since then. The index also gave [2] rise to the word burgernomics. UBS Wealth Management Research has expanded the idea of the Big Mac index to include the amount of time that an average worker in a given country must work to earn enough to buy a Big Mac. The working-time based Big Mac index might give a more realistic view of the purchasing power of [3] the average worker, as it takes into account more factors, such as localwages. One suggested method of predicting exchange rate movements is that the rate between two currencies should naturally adjust so that a sample basket of goods and services should cost the same in both currencies (PPP). In the Big Mac index, the basket in question is a single Big Mac burger as sold by the McDonald's fast food restaurant chain. The Big Mac was chosen because it is available to a common specification in many countries around the world as local McDonald's franchisees at least in theory have significant responsibility for negotiating input prices. For these reasons, the index enables a comparison between many countries' currencies. The Big Mac PPP exchange rate between two countries is obtained by dividing the price of a Big Mac in one country (in its currency) by the price of a Big Mac in another country (in its currency). This value is then compared with the actual exchange rate; if it is lower, then the first currency is undervalued (according to PPP theory) compared with the second, and conversely, if it is higher, then the first currency is over-valued. For example, using figures in July 2008:
[4]

1. the price of a Big Mac was $3.57 in the United States (Varies by store)

29 in the United Kingdom (Britain) (Varies by region) 3. the value of iPods should be more consistent globally. As of April 2009. In many countries. introduced the Billy index where they convert local prices of Ikea's Billy bookshelf into [7][8][9][10] US dollars and compare the prices.00 to £1 at the time 5. adapted the idea behind the Big Mac index to create an "iPodindex. this theory can be criticised for ignoring shipping costs. However. and import duties on selected items may not be representative of the country's economy as a whole.2. the cost of advertising (considerable in some areas). Nevertheless.50 in Belgium. and not all a reflection of relative currency values. what proportion of sales might be to expatriates. Overall. a Big Mac sold in New York City will be more expensive than one sold at a McDonald's located in a rural area of a neighboring state. The relative cost of high-marginproducts. such as essential pharmaceutical products. a high-volume and low-margin approach makes most sense to maximize profit.99. local taxes.00-1. eating at international fast-food chain restaurants such as McDonald's is relatively expensive in comparison to eating at a local restaurant. and the demand for Big Macs is not as large in countries like India as in the United States. the price of a Big Mac will be a reflection of its local production and delivery cost.29 = 1. McDonald's restaurants are cheaper in Belgium.56)/1. and most importantly what the local market will bear . as much as relative currency values. a hamburger sandwich costs only €1 in France. the Big Mac is trading in Germany at €2. the implied purchasing power parity was $1. the pound was thus overvalued against the dollar by 28% The Eurozone is mixed. it showed [5] a Tall Latte index with the Big Mac replaced by a cup of Starbucks coffee. McDonald's is also using different commercial strategies which can result in huge differences for a product. In some markets. [edit]Limitations While economists widely cite the Big Mac index as a reasonable real-world measurement of [11][12] [13] purchasing power parity.56 to £1. Thus the relative prices reflect more than currency values. levels of competition. that is $3.quite different from country to country. For example. which would imply that the Euro is slightly trading above the PPP. For example.P.56]*100= +28% 6. or cellular telephony might compare local capacity and willingness to pay. an Australian bank's subsidiary.96. this compares with an actual exchange rate of $2. there is no theoretical reason why non-tradable goods and services such as property costs should be equal in different countries: this is the theoretical reason for PPPs being different from market exchange rates over time. In 2007. Commonwealth Securities. and €1. with the difference being 10. In addition. the burger methodology has some limitations. which translates into US$3. [(2.9%.56 4. Prices of Big Macs can also vary greatly between different areas within a country. Social status of eating at fast food restaurants like McDonald's in a local market." The bank's theory is that since the iPod is manufactured at a single place. [edit]Variants The Economist sometimes produces variants on the theme. [citation needed] but overall.57/£2. the price of a Big Mac was £2. [edit]Manipulation . while in others a higher margin will generate more profit. which will vary depending on how far the product is delivered [6] from its "single place" of manufacture in China. Bloomberg L. For example in January 2004. as prices differ widely in the EU area.

The New York Times. Not all Big Mac burgers offered by the chain are exclusively beef. is sold for an unusually low price compared to other items.34 (7.79 (41 kr.) Sweden . 4.$2. reportedly forced McDonald's to sell the Big Mac [15][14] at an artificially low price to manipulate the country's performance on the Big Mac index.36). The chicken Maharaja Mac serves as a substitute for the Big Mac.5 HKD) .$5.81 (6. and other media reported on the unusual pricing. The Economist stated in January 2011 that Big Mac index "does support claims that Argentina’s government is cooking the books. 2.11 (18 UAH) Russia . A [15] Buenos Aires newspaper stated "Moreno loses the battle".Critics of the presidency of Cristina Fernández de Kirchner in Argentina and many economists believe that the government has for years falsified consumer price data to understate the country's true [14] inflation rate.68 (10. it was reported that all three of the McDonald's in Iceland would be closing primarily due to the chain's high cost of importing most of the chain's meat and vegetables from the Eurozone. and is 8% lighter than the version sold in [16] Mexico." That year the press began reporting on unusual behavior by the more than 200 Argentinean McDonald's.$5.15 (70 RUR) Malaysia . In October 2009. both individually and as part of value meals.$2. 5.37 (31. The restaurants no longer prominently advertise Big Macs for sale and the sandwich. 3.$2.$6. a Big Mac in Iceland cost 650 krona ($5.$5. closer to that of other meals. In June 2012 the price of the Big Mac value meal suddenly rose by 26%. Ukraine .$2. At the time.$2. Switzerland . Secretary of Commerce in the Kirchner government. 5. [edit]Comparison issues The Big Mac (and virtually all sandwiches) vary from country to country with differing nutritional values.35 MYR) China . [edit]Figures Five most expensive (12 January 2012) (not considering the fact that the buyer's equivalent [18][19] purchasing power is different) 1. There is a lot of variance with the exclusively Beef "Big Mac": the Australian version of the Big Mac has 22% fewer calories than the Canadian version. after The Economist. 4. 3.50 CHF) Norway . 2.29). weights and even nominal size differences.) Brazil .13 (16.$6.4 CNY) [20] Hong Kong .5 Kr.) Five most affordable (12 January 2012) (not considering the fact that the buyer's equivalent purchasing power is different and not including the Indian Big Mac which contains chicken instead of [18][19] beef) 1. In India — which is a predominantly Hindu country — beef burgers are not available at any McDonald's outlets.44 (15.25 R$) Denmark . and the 20% price increase that would have [17] been needed to stay in business would have increased that cost to 780 krona ($6.91 (41 Kr. Guillermo Moreno. The gap between its average annual rate of burger [12] inflation (19%) and its official rate (10%) is far bigger than in any other country.

9. 6.14 minutes Zürich . 7. 2. 10.6.59 minutes also Golden Arches Theory of Conflict Prevention Christmas Price Index Recession index List of unusual units of measurement List of humorous units of measurement Banana equivalent dose .136 minutes Mexico City .62 minutes Mumbai .a whimsical way of looking at radiation exposure . 7. 4.15 minutes Ten slowest earned (July 2009) 1.$2. 2. 3. 4. 9. 8.45 (19. Tokyo . 6.13 minutes Auckland .61 minutes Budapest .69 minutes Bratislava .15 minutes Dublin . 5.12 minutes Miami .14 minutes Sydney .158 minutes Jakarta . [edit]See       Nairobi .10 minutes Los Angeles . South Africa . 8. 3.126 minutes Manila .11 minutes Chicago . 5.12 minutes New York City .129 minutes Caracas .82 minutes Santiago de Chile .88 minutes Cairo . 10.95 ZAR) Ten fastest earned (July 2009) 1.14 minutes Toronto .