What can a Big Mac tell us about the price of tea in China? Turns out, a lot.
For 24 years, The Economist magazine has measured the value of currencies around the globe using those two all-beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun.
China, for example, where you can buy almost two Big Macs for the price of one in America, has the world's most undervalued currency, the magazine recently concluded.
The Big Mac Index was designed to explain an economic concept called purchasing power parity, the concept that a dollar should buy the same amount from country to country. If there is parity, the price of a commodity – in this case a Big Mac – should be equal across the globe.
This year's index found that Big Mac prices, adjusted to U.S. dollars, ranged from $6.87 in Norway to $1.83 in China. The average price in the United States is $3.58.
While the Big Mac Index is a novel way to look at what a dollar buys from one country to the next, it also has proved strikingly accurate at foreshadowing changes in currency, University of Florida Professor Dave Denslow said.
To read the res of the story, please go to: The Palm Beach Post.