1.
Please go to the following web page where you will find the Big Mac Index:
http://www.economist.com/markets/bigmac/displayStory.cfm?story_id=5389856
The Big Mac, perhaps the world's most popular sandwich, was created in 1968 by a
McDonald's franchisee in Pittsburgh, Pennsylvania. Economists also see the sandwich as a
consumer good that is sold at over 25,000 McDonald's restaurants in 116 countries around the
world. Because of its popularity, the Big Mac allows economists to make (admittedly
unscientific) comparisons of exchange rates and relative prices in countries around the globe.
This table looks at how the Big Mac Index helps explain variation in exchange rates and prices.
Questions:
What is the most undervalued currency as per the Big Mac Index?
What is the most overvalued currency as per the Big Mac Index?
Any other conclusions?
Solution
As per Big Mac Index, most undervalued currency is Yuan (China) and most overvalued
currency is Swiss Franc (Switzerland).