"The Big Mac Index Is the Economist's Burger-Based Measure of Whether

question 379

Multiple Choice

"The Big Mac index is The Economist's burger-based measure of whether currencies are over- or undervalued.... [E]xchange rates should eventually adjust to make the price of a basket of goods the same in each country. Our basket contains just one item: the Big Mac hamburger, which is pretty much the
Same around the world."
The Economist, July 28, 2012
Which principle is The Economist relying on when using the Big Mac to value exchange rates?

• A) interest rate parity
• B) market price parity
• C) purchasing power parity
• D) exchange rate parity

---

Definitions:

Usable Form

A state or format of a substance that can be directly utilized by an organism or machine.

Transformed

In biology, refers to the process of changing a cell's characteristics through genetic modification or in cell culture. Outside biology, it can imply a comprehensive change in appearance or condition.

Specificity

The ability of a test or procedure to correctly distinguish those without a disease or condition from those who have it, often referred to in the context of diagnostic testing.

Preferred pH

The optimal acidity or alkalinity level at which an enzyme, organism, or biochemical process functions most efficiently.