The index is based on a theory called purchasing-power parity. It was designed to compare the price of currencies between different countries.
#How much does a big mac cost in mexico mac#
The Economist Newspaper created the Big Mac Index in 1986. Using the Big Mac Index to Measure Inflation The official economic growth rate would be lower today if prices were based on the Big Mac Index.The price of bonds would be much lower if interest rates fully accounted for the rise of inflation based on the Big Mac.For individuals relying on Social Security, the compensation for inflation is not keeping up with the prices people actually pay.
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The rise in the price of the Big Mac foreshadows how the printing of money is eroding the financial system’s arterial walls. The price hikes represented by this popular burger will impact individuals more than the saturated fat content the Big Mac bears.
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If we were using the Consumer Price Index (CPI), the price of a Big Mac today would be about $3.80 (see the graph below). As of January 9, 2016, The Economist reports that the average Big Mac now equals $4.93. In 1998, the average price of a Big Mac was about $2.50. The rise in the price of a Big Mac is occurring faster than the official rise in consumer prices and has been this way since the late 90s. This represents a 12-month change of 2.9% and is a representation of typical inflation however, this is certainly greater than the Bureau of Labor Statistics’ measure of inflation. Last week the Consumer Price Index (CPI) was released by the Bureau of Labor Statistics, stating that “over the last 12 months, the all-items index increased 0.7% percent before seasonal adjustments.”Īs an update, the Economist Big Mac price in the U.S.
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This blog entry has been updated with new data through the end of December 2015. This article was originally posted on October 2013 on AUM in a Box.