The Big Mac Index suggests that exchange rates should leave Big Mac hamburgers costing the same in the U.S.as abroad.

Question

Quizplus · Accepted Answer

The Big Mac Index is an informal way to measure the purchasing power parity (PPP) between two currencies. It suggests that exchange rates should equalize the price of a Big Mac burger in different countries. If the price of a Big Mac is higher or lower in a particular country compared to the US, it indicates that the local currency is overvalued or undervalued against the dollar. Therefore, the Big Mac Index implies that exchange rates should make Big Macs cost the same in the US and abroad, which means that Answer A is correct.

The Big Mac Index Suggests That Exchange Rates Should Leave