Question

explain the difficulties in construction of consumer price index

Answer 1

A country's consumer price index, or CPI, is considered one of the most fundamental and critically important economic indicators, not only in the United States but in virtually every other developed nation as well. The release of monthly CPI numbers almost invariably has a significant impact on the financial markets, and unexpectedly high or low numbers often wreak investment havoc. But despite the CPI being followed so relentlessly, the index is far from perfect as a measure of either inflation or the cost of living, and it has a number of inherent weaknesses.