A Big Mac cost $18,900 COP pesos in Colombia in December 2022.

mamunur3 · Post by **mamunur3** » Tue May 21, 2024 5:08 am

Simply put, it allows us to understand how exchange rates between currencies should adjust so that we can buy the same amount of goods and services in different places. The problem that exists in this comparison is that finding the value of all the elements in the family basket worldwide is very complicated. It is for this reason that The Economist invents the Big Mac Index to achieve this.

How is the Big Mac Index calculated? Let's use the Big Mac Reunion Email List index to understand what has happened to the dollar in Colombia as an example. In the following graph we show you how much a Big Mac was worth around the world in 2022: To make the comparison we use this data: The dollar exchange rate in December 2022 was $4,545.

55 COP In other words, a Big Mac cost $18,900 COP/$4,545.55 COP = $4.15 USD in Colombia. And in the United States it cost $5.36 USD To calculate the Big Mac Index we do the following: $18,900 COP/$5.36 USD = $3,526.12 COP (this would be the change if there were economic parity) $3,526.12 COP compared to $4,545.55 COP suggests that the Colombian peso was undervalued by 22.