Today I want to talk about a peculiarity, currently the purchasing power of a nation is based on several indices that we know dale different world stock markets, but there are other indices that are derived from ‘global economy.
The Big Mac index is an informal tool to compare the purchasing power. This measurement assumes as valid the theory of purchasing power parity.
The central assumption of the “purchasing power parity” is that the exchange rate between two currencies should naturally tend to adjust so that a basket of goods has the same cost in both currencies. Big Mac index, the “basket” is composed of a single Big Mac, as sold by the fast food chain McDonald’s. The Big Mac was chosen because it is available with the same specifications in different nations of the world, and the local McDonald’s franchise have an important responsibility in negotiating prices. For these reasons, the index provides a meaningful comparison between the currencies of many nations. (wikipedia)