The Big Mac Index. METAL film 1.04

The Big Mac Index provides a way of understanding percentages in the context of international currency markets. Produced as part of the education project, Mathematics for Economics: enhancing Teaching & Learning. See more at: http://www.metalproject.co.uk

Category:

Education

Tags:

• Learn
• Math
• Maths
• Mathematics
• Economics
• Education
• Percentages
• Big
• Mac
• Index
• International
• Currency

[JT8642]

thanks for the vid

[vanostraniii]

I'll have one BigMac, please.

[QueerAsian4Bear]

Then he goes on to explain, which I think is wrong.

In his example, a Big Mac costs 1.99 pound in UK, and 1 pound is exchanged for $1.56. Thus a Big Mac costs $3.14 in London, hence it's more expensive in UK and the pound is overvalued.

Of course, this example is correct if $1 buys 1.56 pounds (as entreri pointed out a year ago), but such an exchange rate never existed. the example might confuse beginners studying PPP for the first time with knowledge of actual exchange rates.

[QueerAsian4Bear]

I still cannot figure this out.... I suspect if this guy is wrong...

First of all, he quotes forex rates in consistently. For example, he quotes UK pounds and Euro as "how many dollars can one unit of this currency buy?" (i.e., 1 pound is exchanged for $1.56, one Euro is exchanged for $1.1), while he quotes Polish zloty as the exchange rate of zloty/US$, i.e., a dollar can buy 3.89 zloty).

(continued)

[AMTig0]

thank you very very much that was so helpful......

[CitizenXification]

I want a big mac now

[overshooting]

Your PPPs are foreign currency per dollar and the exchanges rates are $ per foreign currency. Pound and euro should be overvaluated against $

[igormoreno]

There is a website that makes these currency conversions using the Big Mac price. It's quite cool!

[ertreri]

LOLOLOl

forget it, in your tables the actual rate is that: 1 dollars buys 1.58 pounds.

Now the example makes mathematical sense, even if it is totally unrealistic as far as actual exchange rates go.

Anyway, thanks for the video.