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Secondary V • 11mo.

Hello,


I would like to know what the Bigmac index is.

Thanks

Contemporary World
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Explanations (1)

  • Explanation from Alloprof

    Explanation from Alloprof

    This Explanation was submitted by a member of the Alloprof team.

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    Team Alloprof • 11mo.

    Hello!

    The Bigmac index serves as a benchmark for economists.

    It is used in order to see if a currency is undervalued or overvalued against another currency. For example, if the price of a Bigmac in Canada (expressed in US dollars) is higher than the price of a Bigmac in another country (also expressed in US dollars), we say that the currency of this country is undervalued against the Canadian dollar.

    Bigmac is used as a reference since in all countries it has the same components / ingredients. It should therefore be worth the same price. This is called the purchasing power parity theory.

    Hope that answers your question!

    Let us know if we can help you with anything else! :)

    -Marilee