Big Mac Index

An index devised by The Economist magazine to illustrate the notion of purchasing power parity. The Big Mac Index compares the price of McDonald's Big Mac burgers in various countries as a guide to whether currencies are overvalued or undervalued. It's based on the assumption that exchange rates should adjust to equalise the price of the same item no matter in which country it is purchased. If the prices are different there is an anomaly in the valuation of the local currency.