Big Mac Index is contstructed upon the theory of purchasing-power parity (PPP) where it is postulated that a dollar should buy roughly the same amount in all countries. Theoretically the exchange rate over time between two countries should move towards parity that will equalize the prices identical basket of goods and services in each country indexed. The "basket" that the Economist chose is the McDonald's Big Mac. This product is produced in 120 countries world wide. According to the Economist, Big Mac PPP is the exchange rate that would translate into hamburgers costing the same in America as abroad. Comparing the actual exchange rate with the PPP indicates whether a currency is overvalued or undervalued ("Big mac index," 2011) Based upon the 2010 figures, the country where the Big Mac is the most expensive is in Norway where it cost $7.88 ("2010 big mac index," 2010). It is least expensive to buy a Big Mac in Croatia where it costs $1.50...
These factors mean that the old economic theories are not always working properly and are not always properly adapted to the current globalization conditions. Following from this, as more importance is weighted towards behavioural economics, the old theories and rational behaviours of population are believed to weigh less now and thus give misleading guidance to the market players. 4. a. I believe that economic terms can be used for both examination
As economic crisis in the United States has caused families to save rather than spend, which will cause exports from these countries to decline. While these economists certainly understand the concepts of demand, the article suggests that economic pain for developing countries might not necessarily be the case. Instead, the article suggests that countries who have the ability to stimulate their own economies through savings will be able to
This is one of the fears that many people share, and that the Economist article deftly points out. The Fed's argument about keeping interest rates low as a mechanism for job creation has also been rather unproductive. The Fed argues that by offering low interest rates on borrowed money that businesses will take loans to grow. But in this recession, there is no reason to grow when there is decreased
The author noted that this was an important step to help ease the problems created by the collapse of non-bank funding. The author concludes by noting that the proposed package's tremendous size combined with its lack of clear details or forceful regulation leave the program open to criticisms that it is both too vague and too timid. Furthermore, he points out that the plan's failure to fully account for the
economist Approach The production and sale of alcoholic beverages contribute a small share in national product in the United States and in other advanced economies. However, the damaging effects of alcohol consumption on health and safety constitute a very significant economic burden, reducing our overall standard of living. Chronic heavy drinking causes organ damage that result in disability and early death. Other possible consequences include cognitive impairment, addiction, reduced productivity,
For example, if apple prices are higher than orange prices, consumers are likely to buy more oranges, since the fruits are virtually substitute goods for one another. So long as the apple growers can still make a profit, they will very likely lower their prices to meet consumer demand, until demand for apples increases again. Another example is that of gas prices. While gas 'gouging' certainly exists, it is
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