What does Big Mac index mean?

Big Mac index meaning in Economics Dictionary

The Big Mac list was devised by Pam Woodall of Economist in 1986, as a light-hearted guide to whether currencies have reached their "correct" level. It is according to among the earliest principles in worldwide business economics, purchasing power parity (PPP), the idea that a dollar, state, can buy the same amount throughout countries. In the end, argue ppp fans, currencies should go towards change price, which equalises the costs of the same container of goods and solutions in each nation. In this situation, the container is a McDonalds' Big Mac, that will be manufactured in significantly more than 100 nations. The Big Mac PPP is the change price that will keep hamburgers costing similar in the us as elsewhere. Researching real exchange rates with PPP indicators whether a currency is undervalued or overvalued. Some research reports have found that the top Mac list can be an improved predictor of money motions than even more theoretically thorough models.

Big Mac index meaning in Finance Dictionary

A crude but entertaining analysis, originated because of the The Economist mag, comparing the price tag on the ubiquitous treat, designed to show relative prices internationally and judge whether a currency may be over or undervalued.

Big Mac index meaning in Law Dictionary

The list that measure buying power between currencies. The economist posts the info in spring.