Big Mac Index

Category: Other Finance
- May 10, 2025
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The Big Mac Index was invented by The Economist as a lighthearted guide to whether currencies are at their "correct" level. It's based on the theory of purchasing-power parity (PPP), which states that exchange rates should adjust until the price of an identical basket of goods (in this case, a Big Mac) is the same across countries.

Select Countries to Compare

Big Mac Index Results

Local Big Mac Prices
United States: $ 5.79
Switzerland: CHF 7.10
Exchange Rates
Actual: 1 USD = 0.88 CHF
Implied PPP: 1 USD = 1.23 CHF
Big Mac Index
+38.0%
The Swiss franc is overvalued by 38.0% against the US dollar
GDP-Adjusted Index
+41.9%
Adjusted for GDP per person

What This Means

According to the Big Mac index, the Swiss franc is 38.0% overvalued against the US dollar. This suggests that based on purchasing power parity theory, the Swiss franc may be trading at a premium to its "fair" value relative to the US dollar. The GDP-adjusted index, which accounts for differences in economic development, shows an even higher valuation of 41.9%.

About the Big Mac Index

Invented by The Economist in 1986, the Big Mac index is based on the theory of purchasing-power parity (PPP), according to which exchange rates should adjust to equalize the price of a basket of goods and services across countries. The Big Mac is used because it is produced locally to the same recipe in many countries around the world.

A Big Mac costs 5.79 in the United States and 7.10 in Switzerland, implying an exchange rate of 1.23. The actual exchange rate is 0.88, suggesting the Swiss franc is overvalued by 38.0% against the US dollar.

The GDP-adjusted index addresses the criticism that average prices should be lower in poorer countries than in richer ones because labor costs are lower. It adjusts for GDP per person.

Disclaimer: The Big Mac Index is a lighthearted guide created by The Economist to measure purchasing power parity between nations. It should not be used as the sole basis for currency valuations or investment decisions. Data as of January 2025.

Big Mac Index Formula:
Implied Exchange Rate (PPP) = Price of Big Mac in Target Country ÷ Price of Big Mac in Base Country
Valuation (%) = ((Implied Rate ÷ Actual Exchange Rate) - 1) × 100

What is the Big Mac Index?

The Big Mac Index is a fun yet insightful tool developed by The Economist to help compare the value of currencies around the world. It uses the cost of a McDonald's Big Mac burger in different countries to assess whether a currency is overvalued or undervalued based on the theory of Purchasing Power Parity (PPP).

The idea is simple: if a Big Mac costs more in one country than another after converting the prices into a common currency, it suggests the currency may be overvalued. If it's cheaper, it may be undervalued.

Purpose of the Calculator

This calculator helps users explore how currencies stack up against each Other using a single item – the Big Mac – as a price benchmark. While it doesn't replace professional Financial tools like a Currency Exchange Rate Calculator or a payment planning tool, it offers a playful way to consider purchasing power and economic context.

You can use this tool to:

  • Compare the cost of living between countries.
  • Understand how your currency's value relates to others.
  • Get a quick overview of economic disparities using a real-world example.

How to Use the Big Mac Index Calculator

Follow these steps to get an instant valuation:

  • Select a Base Country from the dropdown menu. This is your reference currency.
  • Select a Target Country to compare against.
  • Click “Calculate Index” to see the results.
  • The tool displays Big Mac prices, actual and implied exchange rates, and valuation percentages.
  • Optionally, you can reset the selection with the “Reset” button.

What the Results Show

The calculator provides two valuation figures:

  • Big Mac Index: Shows if the target country’s currency is overvalued or undervalued compared to the base country.
  • GDP-Adjusted Index: Factors in economic development by considering GDP per person for a more refined comparison.

Why Is This Useful?

While the Big Mac Index isn’t a substitute for technical tools like an Inflation Calculator or a loan payment estimator, it offers a fun way to visualize:

  • Currency overvaluation or undervaluation in plain terms.
  • How economic strength can affect purchasing power.
  • Real-world examples of exchange rate disparities.

It’s also a great conversation starter and a learning tool for students, travelers, and anyone curious about global economics.

Frequently Asked Questions (FAQ)

Is this calculator meant for serious financial decisions?

No. While based on economic theory, the Big Mac Index is intended as an educational and illustrative tool. For financial decisions, use professional-grade tools like a monthly payment tool, Sales Tax Calculator, or commission estimator.

How accurate is the Big Mac Index?

It’s not precise, but it provides a useful snapshot. It reflects the price of a single consumer good and doesn’t account for broader economic factors like trade policies or service costs.

Can it help me understand inflation?

Yes, indirectly. It complements tools like a CPI inflation tool by highlighting purchasing power and relative cost changes across countries.

Why use the Big Mac?

The Big Mac is widely available and fairly standardized globally, making it a convenient benchmark for comparing prices.

Closing Thoughts

The Big Mac Index Calculator gives you an entertaining way to look at global currencies and economic disparity. It won’t replace tools like a payment breakdown tool or a consumer price index guide, but it will certainly add flavor to your understanding of international Finance.