Grocery payments are ballooning. Restaurant markups really feel like a direct private affront. And even quick meals, as soon as the go-to for an inexpensive, fast meal, not presents the identical worth it as soon as did — with many People now contemplating it a luxurious.

In a world the place a fundamental burger to-go can set you again $10 (or extra), it is cheap to query: What precisely is a greenback price as of late? That’s the place the Massive Mac Index is available in — a surprisingly intelligent, if quirky, solution to measure foreign money worth by evaluating the value of McDonald’s signature burger world wide.

Born from a tongue-in-cheek thought by The Economist in 1986, the Massive Mac Index, which is up to date twice a 12 months, has grown right into a broadly referenced instrument for understanding buying energy and foreign money misalignment. It transforms an on a regular basis merchandise into an financial lens, providing an accessible solution to discover why your cash appears to go additional — or not — relying on the place you might be.

So, why a Massive Mac? 

The Economist launched its Massive Mac Index as a way to shortly measure a rustic’s foreign money by monitoring the price of the McDonald’s hamburger in areas world wide. As Usha Haley, Barton Distinguished Chair in Worldwide Enterprise at Wichita State College, defined to Meals & Wine, it is all primarily based on the Buying Energy Parity principle.

“A Massive Mac, which is pretty standardized world wide, ought to price the identical in all places if change charges are in stability,” Haley stated. “The Massive Mac then turns into a tough basket of currencies, an approximation of what you should buy with native foreign money in any nation, masking a variety of merchandise, together with beef, wheat, onions, tomatoes, dairy, and so forth. The price of a Massive Mac ought to then inform us whether or not a foreign money is over- or undervalued.”

Taylor Kovar, a licensed monetary planner and founding father of 11 Monetary, added that it has grow to be such a preferred instrument through the years as a result of it makes it simple for everybody to grasp.

“As an alternative of diving into dense charts and formulation, The Economist requested a easy query: how a lot does a Massive Mac price in numerous international locations,” he stated. “It’s simple to grasp and type of enjoyable to speak about, which is uncommon in economics.”

What precisely can the Massive Mac Index inform us? 

As of January 2025, a Massive Mac within the U.S. prices $5.79, based on the Massive Mac Index. This suggests that we should always be capable of convert that amount of money into a brand new foreign money — say the Swiss franc — and nonetheless buy that very same Massive Mac, assuming the 2 nations have buying energy parity. Nevertheless, on this 12 months’s Massive Mac Index, a burger in Switzerland prices SFr 7.20, roughly the equal of $8.74. This means that the franc might be overvalued by as a lot as 38%, based on the index. 

Nevertheless, it is vital to keep in mind that understanding a foreign money entails way more nuance than merely the price of lunch.

“It is a intelligent information for recognizing foreign money misalignments, but it surely would not account for native labor prices, provide chains, or cultural pricing quirks (attempt shopping for a Massive Mac in Switzerland with out gasping),” Michael Ashley Schulman, the chief funding officer at Working Level Capital Advisors, added. “Regardless of this, it is beloved by economists, policymakers, and journalists as a result of it interprets advanced international economics into one thing bite-sized and digestible.” 

Different useful quick-service indexes 

The Massive Mac is not the one method economists can shortly translate economics. Schulman famous, “Different tasty options embody the ‘iPhone Index,’ which measures buying energy by Apple’s ubiquitous system, and the ‘Starbucks Tall Latte Index,’ for many who want their financial comparisons with foam artwork. Whether or not utilizing burgers, telephones, or espresso cups, these indices remind us that typically the easiest way to grasp an advanced world is thru our stomachs.” 

In the long run, the Massive Mac Index’s greatest power is that it serves as an ideal reminder that economics doesn’t must be boring or sophisticated. “It’s a tough and prepared snapshot of whether or not a foreign money is likely to be under- or overvalued,” Kovar added. “Consider it extra like a dialog starter than a crystal ball.”