What Is the Big Mac Index? Economics Experts Explain

Grocery bills are ballooning. Restaurant markups feel like a direct personal affront. And even fast food, once the go-to for a cheap, quick meal, no longer offers the same value it once did — with many Americans now considering it a luxury.

In a world where a basic burger to-go can set you back $10 (or more), it's reasonable to question: What exactly is a dollar worth these days? That’s where the Big Mac Index comes in — a surprisingly clever, if quirky, way to measure currency value by comparing the price of McDonald’s signature burger around the world.

Born from a tongue-in-cheek idea by The Economist in 1986, the Big Mac Index, which is updated twice a year, has grown into a widely referenced tool for understanding purchasing power and currency misalignment. It transforms an everyday item into an economic lens, offering an accessible way to explore why your money seems to go further — or not — depending on where you are.

So, why a Big Mac? 

The Economist launched its Big Mac Index as a means to quickly measure a country's currency by tracking the cost of the McDonald's hamburger in locations around the world. As Usha Haley, Barton Distinguished Chair in International Business at Wichita State University, explained to Food & Wine, it's all based on the Purchasing Power Parity theory.

“A Big Mac, which is fairly standardized around the world, should cost the same everywhere if exchange rates are in balance,” Haley said. “The Big Mac then becomes a rough basket of currencies, an approximation of what you can buy with local currency in any country, covering a range of products, including beef, wheat, onions, tomatoes, dairy, and so on. The cost of a Big Mac should then tell us whether a currency is over- or undervalued.”

Taylor Kovar, a certified financial planner and founder of 11 Financial, added that it has become such a popular tool over the years because it makes it easy for everyone to understand.

“Instead of diving into dense charts and formulas, The Economist asked a simple question: how much does a Big Mac cost in different countries,” he said. “It’s easy to understand and kind of fun to talk about, which is rare in economics.”

What exactly can the Big Mac Index tell us? 

As of January 2025, a Big Mac in the U.S. costs $5.79, according to the Big Mac Index. This implies that we should be able to convert that amount of cash into a new currency — say the Swiss franc — and still purchase that same Big Mac, assuming the two nations have purchasing power parity. However, in this year's Big Mac Index, a burger in Switzerland costs SFr 7.20, approximately the equivalent of $8.74. This indicates that the franc could be overvalued by as much as 38%, according to the index. 

However, it's critical to remember that understanding a currency involves much more nuance than simply the cost of lunch.

“It's a clever guide for spotting currency misalignments, but it doesn't account for local labor costs, supply chains, or cultural pricing quirks (try buying a Big Mac in Switzerland without gasping),” Michael Ashley Schulman, the chief investment officer at Running Point Capital Advisors, added. “Despite this, it's beloved by economists, policymakers, and journalists because it translates complex global economics into something bite-sized and digestible.” 

Other handy quick-service indexes 

The Big Mac isn't the only way economists can quickly translate economics. Schulman noted, “Other tasty alternatives include the ‘iPhone Index,' which measures purchasing power through Apple’s ubiquitous device, and the ‘Starbucks Tall Latte Index,' for those who prefer their economic comparisons with foam art. Whether using burgers, phones, or coffee cups, these indices remind us that sometimes the best way to understand a complicated world is through our stomachs.” 

In the end, the Big Mac Index’s biggest strength is that it serves as a great reminder that economics doesn’t have to be boring or complicated. “It’s a rough and ready snapshot of whether a currency might be under- or overvalued,” Kovar added. “Think of it more like a conversation starter than a crystal ball.”