COMP NEWS – It’s no secret: high inflation has dominated news channels for months now, and consumers are still contemplating the practical implications of ballooning inflation. To help describe these effects, many economists use what is called the ‘Big Mac Index’ as a way of measuring real-world purchasing power.

The price of a McDonald’s Big Mac burger has risen 40% over the last 10 years, CNBC reported, and because its price incorporates many economic factors, many believe this popular fast food item is one way to understand current inflation rates and purchasing power of the U.S. dollar.

 

According to The Economist, the index was created as a “lighthearted guide” to whether global currencies are at their “correct” level.

 

“Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible,” The Economist explained.

 

The Big Mac index shows the alarming inflation we’re experiencing and in some instances, the burger is rising in price faster than several economic measurements.

Analysis of the price of Big Macs over time can tell a story not only about US inflation but inflation in other countries across the world.

CNBC reported that the burger costs an average of $6.05 in the U.S., a 40% increase over the last 10 years. Between Dec. 2020 and Dec. 2021, the annual inflation rate accelerated to 7%. During the same year, the price of a Big Mac also jumped at the same rate. If you’re purchasing a Big Mac meal with fries and a drink, you could end up paying $8 to $10 depending on where you live, CNBC said.

While the price of the Big Mac has increased substantially over the past 10 years, McDonald’s is not alone. With rises in inflation comes increased input costs and thus increased prices for customers.

McDonald’s isn’t the only restaurant chain to pass on soaring costs to customers, however.

 

“In recent years, most fast-food restaurants had, maybe, raised prices in the low single digits each year,” Matthew Goodman, an analyst at M Science, an alternative data research and analytics firm, explained to The New York Times. “What we’ve seen over the last six-plus months are restaurants being aggressive in pushing through prices.”

To read more about inflation and the Big Mac Index, click here.

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