Explain why the index may not be a valid test of the theory, Macroeconomics

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Explain why the index may not be a valid test of the theory

Problem

The Big Mac Index

The Big Mac Index computed by the Economist magazine has consistently found the U.S. dollar to be undervalued against some currencies and overvalued against others. This finding seems to call for a rejection of the purchasing power parity theory. Explain why this index may not be a valid test of the theory.

The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.

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Macroeconomics: Explain why the index may not be a valid test of the theory

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