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vitfil [10]
3 years ago
6

What are the disadvantages of using big macs to measure purchasing power​ parity? ​(check all that apply.​)?

Business
2 answers:
Eva8 [605]3 years ago
5 0

The Economist magazine in the year 1986, proposed a new index as an alternate measure for exchange rate. This new index studies the price of a Big Mac and compares them to calculate exchange rates. It was argued that McDonald was already established in many countries. Therefore, it can be used as a yardstick to compare the purchasing power of various countries. Hence, serves as a measure of purchasing power party. The main problem with this as that not everybody’s consumption basket includes Bug Macs. Rather, a fraction of the total population consumes it. Instead of representing a basket of diverse goods, it represents a basket consisting of a single commodity. As a result, Big Mac index will not reflect true cost of living.

AnnZ [28]3 years ago
4 0
<span>While a familiar benchmark, the number of people who know of Big Macs are not comparable to those who buy them regularly. Thus, comparing a not-as-commonly purchased product with living essentials (such as staple foods and toiletries) provides a level of disconnect that hinders the very comparison it is intended to support.</span>
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