Big Mac Index and Currency Comparison

The video explains the Big Mac Index, introduced by The Economist in 1986, as an informal way to measure currency values globally using the concept of purchasing power parity. The Big Mac, a globally sold product, serves as a standard for comparing costs across countries. By comparing the local price of a Big Mac to its price in the US, the index helps determine if a currency is undervalued or overvalued. This index is crucial for understanding future exchange rate movements and inflation trends.

What year was the Big Mac Index introduced by economists?

• 1980

• 1986

• 1990

• 1995

What is the primary economic concept that the Big Mac Index is based on?

• Supply and Demand

• Purchasing Power Parity

• Inflation

• Interest Rates

How is the Big Mac Index used to compare currencies?

• By comparing the price of a Big Mac in different countries

• By comparing interest rates

• By comparing inflation rates

• By comparing GDPs

In the example given, what was the cost of a Big Mac in India?

• 30 rupees

• 90 rupees

• 120 rupees

• 60 rupees

What was the cost of a Big Mac in America in the example provided?

• $2

• $4

• $3

• $1

Why is the Big Mac a suitable product for this index?

• It is only available in America

• It is the cheapest product available

• It is a luxury item

• It is sold in over 120 countries

What does it mean if a currency is undervalued according to the Big Mac Index?

• The currency is weaker than the dollar

• The currency is not used in international trade

• The currency is stronger than the dollar

• The currency is equal to the dollar

What was the official exchange rate used in the example?

• 45 rupees per dollar

• 75 rupees per dollar

• 30 rupees per dollar

• 60 rupees per dollar

How much was the Indian currency undervalued by in the example?

• 25%

• 50%

• 75%

• 100%

What future economic indicators can the Big Mac Index help predict?

• Future exchange rate movements and inflation rates

• Government policies

• Stock market trends

• Unemployment rates