Chapter 14. Chapter 14

Have you ever traveled to a foreign country or plan to in the near future? If so, you’ll need to buy foreign currency. The rate at which you buy foreign currency will impact how much the trip will cost you. Therefore, how much foreign currency you can buy with your U.S. dollars will be impacted by whether or not currencies are over or undervalued. Use The Economist’s Big Mac Index to explore this idea The Big Mac index.

To access the data:

1. The “Raw index” tab above the map provides the unadjusted index values while the “Adjusted index” tab provides the index adjusted for GDP per person.

2. Once a tab is selected, click the country of interest to view the most recent data.

3. The graph at the bottom of the page shows the data for that country for the available years.

4. The graph on the right displays overvaluation and undervaluation data for the most recent year for all available countries.

5. To view information from a certain time period, click on the country you’re interested in, then hover over or click the graph’s timeline for the period you’re interested in.

6. Click on that country again to deselect it in order to select another country.

Hint: If you can't find the country you're looking for on the map, try clicking or hovering over the bar graph bar for the country you're looking for to see it highlight on the map.

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Now let's explore the Big Mac index over time using the same countries, Mexico and Costa Rica.

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Question 14.1