Big Mac PPP
Big Mac PPP
Big Mac PPP attempts to see how well this holds by measuring the prices of Big Macs. It is calculated by taking the price of a Big Mac in a given country and dividing by the price of an American Big Mac. This gives a relative exchange rate of the two countries and helps one see if a currency is overvalued or undervalued. For example, if a Big Mac costs $1 in the United States and 0.75 pounds in the United Kingdom, the Big Mac PPP is 0.75 GBP:USD. If the official GBP:USD exchange rate is 0.50, then this indicates that the pound is overvalued. The Big Mac PPP is published by The Economist. See also: Currency pair.