Find the price of a Big Mac at a local McDonald's. Compare your price for a local Big Mac against the \"Big Mac Index\" (http://www.economist.com/node/13055650?story_id=E1_TPDVVGVD). Select a country and in 200 to 250 words try to explain why there may be a discrepancy between the Big Mac Index based on the exchange rate and the actual price of a Big Mac. The cost of a Big Mac in Abilene is $5.49. The average cost of a Big Mac in the United States is $3.54. The price of Big Mac in the Philippines is $2.07. The cost of a Big Mac in the Philippines in local currency is 98 pesos. The implied purchasing power parity is 27.7 of the dollar. The exchange rate is 47.7. The over/under valuation against the dollar % is -42. You have the information that you need. The link below is more information, if needed. http://www.economist.com/node/13055650?story_id=E1_TPDVVGVD Solution Based on the data gathered we see that although the PPP in Philippines as per Big Mac index is 27.7, the actual currency exchange rate is 47.7 pesos to 1 dollar. This implies that Peso is undervalued, and that prices of goods are cheaper in Philippines than in US. The reasons for the difference in PPP and exchange rate can be attributed to Taxes - High sales tax in one country means goods are sold at a higher rate in one country than another. Transportation costs - Imported goods are sold at a higher price than locally sourced goods Government regulations - Import tariffs, trade regulations, etc. add to the cost of imported goods, restricts supply in the market, leading to price rise in local market Input costs - Input costs like labor and capital vary significantly across countries. So, oods cost can be more in one country than another Competition - Market competition can influence the level of price setting in a country Inflation - Inflation rate in a country can change the PPP levels by different values. So, we see that the price of goods are dependent on a lot of factors. It might be possible that for some good PPP is lower than the currency exchange rate and for some good PPP is more than the exchange rate. Moreover, currency rates are based on demand and supply for that currency. It is not a true indicator of the other variants like taxes, input costs, government regulations, etc. This is the reason why PPP rates are different from currency exchange rates