7 ms·
When talking about currencies being over or under valued, we're usually not referring to the value of 1 unit of each currency being equal, more the exchange rat
by sudhirj 2y ago
When talking about currencies being over or under valued, we're usually not referring to the value of 1 unit of each currency being equal, more the exchange rates themselves. See the Big Mac index for example, for a real life illustration. You can buy a Big Mac in the US for $X, and a Big Mac in India for INR Y, but $X doesn't necessarily buy you exactly INR Y in the market right now. Might buy you more or less, and if you're using the Big Mac as a standard you would say one of the currencies is over or under valued.