Measuring purchasing power parity (PPP) using the price of a Big Mac is known as what?

The method of measuring purchasing power parity (PPP) through the price of a Big Mac is known as the Big Mac Index. This informal economic indicator was developed by The Economist as a way to compare currencies and determine whether they are undervalued or overvalued relative to the U.S. dollar. The concept is based on the idea that a Big Mac should cost the same amount in every country when adjusted for currency exchange rates, reflecting the relative cost of living and inflation rates in different nations.

The Big Mac serves as a common product that can be found in many countries, making it a useful reference point to analyze purchasing power differences across economies. It highlights disparities in price levels between nations and can offer insights into how much a currency can buy in terms of a standardized good. This makes it a practical tool for economists and analysts when discussing economic conditions and currency valuation on a global scale.