The Big Mac PPP exchange rate between two countries is obtained by dividing the price of a Big Mac in one country (in its currency) by the price of a Big Mac in another country (in its currency). For these reasons, the index enables a comparison between many countries' currencies. The Big Mac was chosen because it is available to a common specification in many countries around the world as local McDonald's franchisees at least in theory have significant responsibility for negotiating input prices. In the Big Mac Index, the basket in question is a single Big Mac burger as sold by the McDonald's fast food restaurant chain. One suggested method of predicting exchange rate movements is that, according to the law of one price, the rate between two currencies should naturally adjust so that a sample basket of goods and services should cost the same in both currencies. The index also gave rise to the word burgernomics. The Big Mac index was introduced in The Economist in September 1986 by Pam Woodall as a semi-humorous illustration of PPP and has been published by that paper annually since then.
