Purchasing Power Parity & the Big Mac Index


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question 1 of 3

Why does the PPP theory claim that the exchange rate will be in equilibrium in the long term?

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1. Why can the Big Max Index be used?

2. _____ tells us when a currency is overinflated.

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About This Quiz & Worksheet

Discover how much you know about the Big Mac Index and PPP using these tools. You will be quizzed on different economic theories and concepts.

Quiz & Worksheet Goals

The goals of this quiz/worksheet combo are to assess your knowledge of:

  • Concept relating to Big Macs
  • Theory that tells us that the exchange rate between two currencies will be equalized over the long-run
  • Tool that tells us when a currency is overinflated
  • Finding the PPP

Skills Practiced

  • Interpreting information - verify that you can read information regarding methods for finding PPP and interpret it correctly
  • Knowledge application - use your knowledge to answer questions about the concept that deals with Big Macs
  • Reading comprehension - ensure that you draw the most important information from the related lesson on the Big Mac Index and PPP

Additional Learning

In order to learn about these concepts and theories, read the lesson called Purchasing Power Parity & the Big Mac Index. This lesson can help you cover these objectives:

  • Determine who made the Big Mac Index popular
  • Compare and contrast overinflated and underinflated currencies
  • Learn how to use the Big Mac Index correctly
  • Examine the purpose of the PPP theory