Based on this equality, a "fair" exchange rate is calculated. The PPP theory says that identical goods in different countries should cost about the same. That is, the required value is 500/25 = 20 rubles. The fair exchange rate for the dollar to the Russian ruble is equal to the quotient of dividing the amount spent in the Russian Federation by the amount spent in the United States.
To buy identical products (in the same quantity) in a US supermarket, they spend $ 25. For example, in a Russian supermarket they spent 500 rubles on the purchase of bread, milk and meat. BMI is based on the theory that the prices of a basket of similar goods of two countries are compared to calculate the real exchange rate. What is the Big Mac Index?īig Mac Index (BMI) is a special parameter used to determine PPP (purchasing power parity). Is there an easier way to measure purchasing power? Yes, and it was featured in The Economist back in 1986. These terms are difficult for ordinary people to understand. Using all this data, economists determine the quality of life of ordinary citizens. To assess the economy of the state as a whole, many complex indicators and terms are used: inflation, denomination, GDP, employment, and many others.
COST OF A BIG MAC IN DIFFERENT STATES HOW TO
What is BMI and how to calculate the Big Mac Index? Why was this particular McDonald's product taken as the basis for some economic calculations? Is the Big Mac Index applicable for Forex market analysis? I wrote an article that answers all of these and some other important questions.
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