BIG MAC INDEX

Big Mac index Name: Institution: Big Mac index generally refers to an informal way of measuring the purchasing power parity usually between two currencies; for instance the US and Canadian currency. It is important because it shows how market exchange rate can swerve from their true values. This index is based on a theory of purchasing power parity. Under this theory, the exchange rate among countries should be altered by the prices of an identical commodity or service that exist among the nations. Thus, it is based on the view that a dollar should buy the same amount among all the nations. This theory was established and printed by the Economist in the year 1986; the article had a lot of impact thus made the magazine to continue its publication until today (Carbaugh, 2011). The recent released Big Mac Index result shows that the most expensively sold Big Mac is in Norway. The price in Norway is almost twice the same price in United States. According to 2010 released results, the price in Norway per piece was about 7.88 US dollars while in United States it was 3.57 dollar. Norway is closely followed by Sweden, Switzerland, and Denmark among others. On the other hand, the cheapest you could buy it was in china, priced at 2.18 US dollars. According to economist...