What does the Big Mac Index measure?

The Big Mac Index is an informal measure of purchasing power parity (PPP) between nations, which essentially assesses the economic health of a country by comparing the relative value of a Big Mac burger in different countries. The concept hinges on the idea that in an efficiently operating market, similar goods should have similar prices when expressed in a common currency. By using the price of a Big Mac—a standardized product available in many countries—the index serves as a straightforward indicator of how undervalued or overvalued currencies are relative to one another.

This measure reflects broader economic conditions such as inflation, wage levels, and overall consumer purchasing power within a nation, making it a unique and accessible tool for understanding economic disparities globally. Thus, it offers insights into economic health by illustrating how currencies stack up against one another based on the cost of living and global pricing trends for a common consumer item.