The Economist’s Big Mac Index is based on the theory of purchasing-power parity, which says that exchange rates should eventually adjust to make the price of a basket of goods the same in each country.

On average, the price of a Big Mac in the U.S. is $5.71 (as of June 2020)

If purchasing power parity holds, how much should the Big Mac cost in China if the exchange rate is $1 = RMB6.676?

The actual average price of a Big Mac in China is approximately 21.7 RMB.

How do you explain the difference between the price implied by PPP and the actual price?

The average price in the U.S. is $5.71, but no doubt prices vary significantly across the country.

What is the price of a Big Mac in your city?

Answer rating: 100% (QA)

Given that Price of a Big Mac in the US 571 and the exchange rate is 1RMB6676 If purchase parity hol... View the full answer