The Big Mac Index -

PPP
Group 6 Members

Abhishek Jais - 20-S-046

Aniket Lele - 20-S-063
Prasad Nagare - 20-S-080
Kapil Patil - 20-S-093
Yashrajsingh Rajput - 20-S-108
Introduction

• The Big Mac index was introduced in The Economist in September 1986 by Pam Woodall
as a semi-humorous illustration of PPP
• In the Big Mac Index, the basket in question is a single Big Mac burger as sold by the
McDonald's fast food restaurant chain
• The Big Mac was chosen because it is available to a common specification in many
countries around the world
• For these reasons, the index enables a comparison between many countries' currencies.
 • The Big Mac PPP exchange rate between two countries is obtained by dividing the price of
a Big Mac in one country (in its currency) by the price of a Big Mac in another country (in
its currency).
• This value is then compared with the actual exchange rate; if it is lower, then the first
currency is under-valued (according to PPP theory) compared with the second, and
conversely, if it is higher, then the first currency is over-valued.

Big Mac Index of Qatar

• A Big Mac costs 13 riyals in Qatar and US$5.81 in the United States
• The implied exchange rate is 2.24. ---The difference between this and the actual exchange
rate, 3.64, suggests the Qatari riyal is 38.5% undervalued