Poland and the Big Max Index

    The country that I chose to do for this assignment is Poland. Poland is the eighth largest economy in the European union and is classified as a high-income economy. One of the largest sections of Polish economy is the service sector. Their more important exports include food, motor boats, hardwood products and little airplanes. With Poland being the eighth largest economy in the European Union, I am confident that my client will largely benefit by going this route of imports and exports.

2/3.) A Big Mac cost $3.57 in the US

A Big Mac cost 7.6 Zloty

The implied purchasing parity is 7.6/3.57 = 2.13

The actual exchange rate between the Zloty and the dollar is 1 dollar to 3.15 Zloty

[(2.13-3.15)/3.15]*100 = -32.38

The Zloty undervalued by 32% due to the fact of $1 in Sweden would be equivalent to 3.15.

This means that if my client chooses Poland to trade with, at first the market may show that they loose money, but if goods and services are traded with after a while, there will be a benefit for both parties.

4.) In Poland if you were to buy a Starbucks Tall Latte, the cost would transfer to be $6.74 USD. Whereas if you were in America the total price would be $2.75 according to the MarketWatch website. This means that in Poland you would be paying two times the prices of a latte compared to if you were in America.

5.) I believe that the Starbucks index is better for my client due to the fact that the dollar to Zloty is closer in price range. If my client were to be trading with Poland, there would be a better ratio compared to the Big Mac Index. This also shows a better evaluation of the prices of the drink and it includes other countries for comparison to make it easier for my client.

6.) I think that this assignment should be included for next year. This is a good way to understand the difference between countries and trading with them means regarding thee money aspect of it. This assignment was a good way to create a hands on experience to understand what the PPP and other index’ like the Big Mac and Starbucks Index show.