The Big Mac Index was loosely created to compare the value of money in different countries. According to this concept, two currencies are in equilibriumknown as the currencies being at par when abasket of goods is priced the same in both countries, considering the exchange rates (The Investopedia Team, 2021). For instance, does the Big Mac in USD have the same (or similar) value as a Big Mac in India. To answer this, some things must be considered: the conversion rate and operational costs such as labor and rent. Yes, they are consistent with the theory of purchasing power because the Law of One Price is the basis of Purchasing Power Parity, which establishes that the value of two currencies is equal when a basket of identical goods has the same price in both countries (Potters, 2020). This is true as long as there are no transactions costs or trade barriers. For example, one USD is equal to 73.52 6207INR (Indian Rupee). In this case, the price of a Big Mac in USD is $4.00. In Indian Rupee, it is 293.37 7393INR. Now we have to determine whether it is overvalued or undervalued in India. Purchasing Power Parity can be difficult to determine as prices constantly change and the various trading costs. Arbitrage doesn't exist for Big Macs as it is not possible to trade overseas. The value would decrease, and there would really be nothing left to sell.

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