When making income comparisons across countries, economists generally prefer to use

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The purchasing power parity (PPP) method is preferred by economists when making income comparisons across countries because it takes into account the differences in the cost of living between countries. This method uses a basket of goods and services to compare the purchasing power of currencies in different countries. The exchange rate conversion method (A) can be misleading as exchange rates fluctuate regularly and may not accurately reflect the true value of currencies. The consumer price index ratio method (B) only takes into account the prices of a limited set of goods and may not accurately reflect the overall cost of living. The interest rate differential conversion method (D) is not used for income comparisons, but rather for analyzing capital flows between countries.

When Making Income Comparisons Across Countries, Economists Generally Prefer to Use