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…
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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