The Big Mac Index

O n Saturday we had our first McDonald’s meal since arriving in Trinidad. Some time ago I ran across the Big Mac index, an attempt “to make exchange exchange-rate theory more digestible.” You can read all about it at The Economist’s website… http://www.economist.com/markets/Bigmac/Index.cfm.
Since Trinidad isn’t listed, we’ll provide our information for the betterment of economists everywhere. BTW, since they use the US dollar and US prices for a Big Mac as the benchmark, we will too.
Cost of Big Mac in Trinidad, TT$13.50
Cost of Big Mac in Trinidad, US$2.26
Implied Purchasing Power Parity of the US dollar, 5.42 (local price divided by price in US)
Actual dollar exchange rate, 5.98
Under valuation against the US dollar, -9%

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