PPP, which is purchasing power parity, is a theory economically that takes different countries’ currencies and compares them using an approach called “basket of goods.” The currencies are in balance, which is known as being at par; the exchange rate is considered what the basket of goods at the same price in each country (Hall,2019). There are several calculations throughout Chapter 10, even one related to the comparison of Big Mac prices, which showed prices could be overvalued or undervalued, United Stated $5.06, China $2.83, and $5.67 in Norway (Hill, 2019, p.296). I would love to pay a lower price for an item; however, the quality of the product may not be the same and may vary from country to country. “Not all goods are traded between all countries, and the weight attached to similar goods in aggregate price indices will differ across countries. A Big Mac cannot be traded internationally or not easily at least: each good contains a high service component—the wages of the person serving the food and drink—and a high property rental component—the cost of providing you with somewhere to sit and sip your coffee or munch your two beef patties on a sesame seed bun with secret-recipe sauce” ( Taylor & Taylor, 2004).
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