If you were asked how a McDonald’s hamburger is, most people would probably answer how it tastes and what the price is. But if you ask an economist, he can “taste” the economic trends of a region, a country, or even the world from a hamburger.
The exchange rate in the Big Mac and KFC index
As an international chain of fast food restaurants, McDonald’s hamburgers are very representative, which can reflect a country’s economic situation and the purchasing power level of its currency. Known in economics as “purchasing power parity,” this comparison puts aside exchange rate considerations.
In South America, how much does a Big Mac cost in Lima, the capital of Peru? In the Middle East, how much does one sell for in Abu Dhabi, the capital of the United Arab Emirates? Comparing the prices of the same product sold in different currencies in different countries can measure the purchasing power level of a country’s currency. For example, there was a time when a McDonald’s Big Mac burger cost $5.06 in the United States and 10.75 lira in Turkey. This means that the average purchasing power of the US dollar against the lira is approximately 1:2.12, that is, one US dollar is equivalent to 2.12 lira. However, based on the exchange rate at that time, the U.S. dollar to lira ratio was 1:3.68, that is, 1 U.S. dollar could be exchanged for 3.68 lira currency. If a person has 5.06 US dollars, he can only buy 1 hamburger in the United States, but if he converts US dollars into lira and then buys the same burger, he can buy 1.73 hamburgers. This means that in the exchange rate market, lira The value is underestimated.
This comparison method also has a popular name, called the “Big Mac Index”. In addition, economists also created the “KFC Index”, which is mainly used to analyze the economic situation of African countries, because McDonald’s restaurants are not common in Africa.
Economic ups and downs over popcorn and baked beans
Economists often judge whether an economy’s development is healthy based on food prices, which led to the creation of the “Cinema Popcorn Index” in 2009, which means that popcorn sales are directly proportional to the development trend of an economy.
At that time, popcorn sales in the UK were gradually increasing, coinciding with the recovery of the British economy after the 2008 financial crisis. The increase in popcorn sales in movie theaters means that there are more people watching movies; more people watching movies means that people have both “leisure time” and “spare money” and a stable income; and stable income means that the economic situation is improving.
In addition, there is another food product, baked beans with tomato sauce, whose sales reflect the trend of economic development. Baked beans are a common side dish, but they are often sold during times of hardship. Because once the economy declines, the number of unemployed people will increase. When many people have no work to do at home, they will watch TV and eat baked beans to pass the time. Therefore, the growth in baked bean sales can be regarded as one of the indicators of economic recession. Sales of baked beans fell in 2013, just as the UK economy was showing signs of health.