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Big Mac Vs Mcdonald's

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Simply converting GDP for all countries is misleading as prices tend to be lower in poorer countries, dollars are generally worth a lot more in China than the USA for example. Therefore using PPP is a more accurate measure of comparing spending power in different countries, giving a more realistic view on the value of different currencies and the cost of living in said countries. An overvalued exchange rate implied by PPP, like in Sweden and Norway as in the table above, implies that a country’s currency is too high for the state of the economy and it means that the country’s exports will be relatively expensive and imports cheaper, meaning domestic demand may depress and encourage spending on imports, meaning GDP growth may be …show more content…
Another reason to use the Big Mac over other goods like commodities is that the PPP posits that identical raw materials will not differ in price between nations, however, the price of the big mac will vary due to differentiation in rental and overhead costs between countries, McDonald’s is a profit making firm and therefore the price of the big mac will be dependent on cost. An alternative to the Big Mac may be to use a basket of goods to develop a more accurate, weighted measure of PPP or to use a higher-end/more expensive good such as a particular car, this would give a completely different view of the purchasing power of different …show more content…
The distribution has also changed. For example in the year 2000, 50% of the population owned 30% of income, yet in 2010 50% of the population owned merely 15% of income, meaning that the remaining 50% of the population own 70% and 85% respectively, this is an extremely uneven distribution and could be down to government taxation policies or lack of education for working class individuals. Overall, there were more low income people in 2010 than in

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