Saturday, May 31, 2014

Currency Value Based on the Big Mac Index

The Big Mac Index was created in 1986 by the Economist in a light hearted attempt to explain the world's exchange rates.  In particular, based on purchasing power parity, it looks at the international basket of goods (which attempt to help balance currency value based on each other) on just one item - a Big Mac.  Yes there are flaws such as cheaper labor costs, cost of transportation, tariffs, etc. in poorer countries, but it gives you a bit of an idea using something every one of your students understand.   On the most basic level it explains one's purchasing power in different countries.  The video above does a great job explaining the index.

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