Burgernomics Explained: Big Mac Index Prices and Currency Insights 2025

Gordon Scott has been a dedicated investor and technical analyst for over 20 years and holds the Chartered Market Technician (CMT) designation.

What is Burgernomics?

Burgernomics is a clever economic concept that uses the price of a McDonald's Big Mac burger to compare the buying power of different currencies globally. This idea, popularized by The Economist’s Big Mac Index, serves as a fun yet insightful tool to understand purchasing power parity (PPP).

Understanding Burgernomics and the Big Mac Index

The Big Mac Index, introduced by The Economist in 1986, uses the cost of a Big Mac as a simple, informal way to evaluate whether currencies are fairly valued against each other. The theory behind it is PPP, which suggests that exchange rates should adjust so that the price of identical goods, like a Big Mac, is consistent across countries.

Key Points to Remember

• Burgernomics uses the Big Mac price to measure PPP between currencies.
• The index compares Big Mac prices in local currencies and contrasts them with actual exchange rates to identify over- or undervaluation.
• Although lighthearted, it provides a quick snapshot of currency valuation.

How Does Burgernomics Work?

The Economist designed the Big Mac Index as a playful guide to assess if currencies are at their appropriate levels. It calculates the exchange rate at which a Big Mac would cost the same in the U.S. and abroad. However, local variations exist, such as in India, where McDonald's sells the 'Maharaja Mac' with chicken instead of beef, excluding it from the survey. Similarly, halal and kosher adaptations affect inclusion in some countries.

Real-World Example: December 2023

In December 2023, a Big Mac cost $5.69 in the U.S. and 39 Danish kroner (DKr) in Denmark, with an exchange rate of 6.85 DKr/USD, indicating fairly valued currencies. Conversely, in Switzerland, the Big Mac was priced at 7.10 Swiss francs (SFr), implying an exchange rate of 1.25 USD/SFr, while the actual rate was 0.87 USD/SFr, showing the Swiss franc was overvalued.

Burgernomics in the Modern Era

Despite shifting consumer preferences in the U.S., the Big Mac Index remains a respected benchmark. The Journal of International Money and Finance in 1997 highlighted its near-perfect universality, given McDonald's presence in over 111 countries with minimal recipe changes.

In 2023, The Economist refined the index, introducing a 'gourmet version' that accounts for labor cost differences by correlating Big Mac prices with GDP per capita. This adjustment offers a more accurate measure of currency valuation.

Is the Big Mac Index a Reliable Tool?

While not a precise indicator, the Big Mac Index is valuable for teaching exchange-rate concepts and is widely used by economists and academics to illustrate currency valuation in an accessible way.

Purchasing Power Parity (PPP) Explained

PPP compares the cost of a standard basket of goods across countries to assess economic strength and living standards. The Big Mac Index simplifies this by focusing on one globally recognized product.

Why Currency Exchange Rates Matter

Exchange rates influence global trade dynamics. A weaker currency makes imports costlier but boosts exports by making them cheaper abroad, while a stronger currency has the opposite effect.

Final Thoughts

The Big Mac Index remains an engaging and practical tool that breaks down complex currency valuation concepts into an easy-to-understand format using a universally loved product—a cheeseburger—helping investors and the public grasp economic realities worldwide.

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