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The Economist created a light-hearted index that compares the price of one famous fast-food item across countries to judge whether currencies are over- or undervalued.

Which fast-food item gives that informal currency index its name?

A Big Mac
The Economist's "Big Mac Index" compares the price of a Big Mac across countries to gauge whether currencies are over- or undervalued — a playful way to explain purchasing power.

The Big Mac Index works because a Big Mac is made almost identically in dozens of countries, so its local price reflects local costs of labor, rent, and ingredients in a fairly consistent way. Converting each country's price into a common currency and comparing it to the US price gives economists a rough gauge of purchasing power: if a Big Mac costs far less than expected once converted, that currency may be undervalued.

Coffee and bread would seem plausible too, but neither is made to a near-identical global recipe, since coffee culture and bread styles vary enormously by region, making cross-country comparisons far less reliable.

The index spawned playful cousins, including a "KFC Index" for parts of Africa where McDonald's has little presence, showing how a gimmick can still carry a genuinely useful economic idea.

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