BUS450 – Purchasing Power Parity

Purchasing power parity (PPP) is a theory that compares purchasing power of currencies from different countries. The Economist magazine publishes a Big Mac index each year, which is directly derived from PPP theory.

Prior to beginning work on this discussion forum,

Locate the most recent overview of the Big Mac index on The Big Mac Index: Our Interactive Currency Comparison ToolLinks to an external site. on The Economist website, and review the cost of a Big Mac in Canada.

In your initial discussion forum post,

Report the following information from the Big Mac index:

• the cost of a big mac for a country that starts with the first letter of your last name,

the implied exchange rate, and

the actual exchange rate using the raw index option, located in the top-right corner.

Describe the “Big Mac Index” as it relates to the PPP.

Explain absolute and relative versions of the PPP.