Question

Which of the following is true regarding the Big Mac Index?

Option 1: It is a global stock market index.
Option 2: It measures the average size of Big Mac burgers in various countries.
Option 3: It is used to assess the purchasing power parity between different currencies.
Option 4: It is a health index related to fast food consumption.

Answer 1

The Big Mac Index measures purchasing power parity (PPP) between currencies by comparing the price of a Big Mac in various countries.

Step-by-step explanation:

The Big Mac Index is an informal way of measuring the purchasing power parity (PPP) between two currencies by comparing the cost of a Big Mac burger in various countries. Contrary to some misconceptions, it is not a global stock market index, nor does it measure the size of Big Mac burgers or relate to a health index tied to fast food consumption. The Big Mac Index is a tool introduced by The Economist magazine in 1986 as a lighthearted guide for comparing currency valuation. It leverages the idea that a Big Mac should cost the same in different countries when measured in a single currency, after adjusting for exchange rates. Therefore, Option 3 from your list is correct: It is used to assess the purchasing power parity between different currencies.