Macroeconomics · Unit 2: Economic Indicators and the Business Cycle · 5 min read · Updated 2026-05-11
Economic Indicators and the Business Cycle — AP Macroeconomics
AP Macroeconomics · Unit 2: Economic Indicators and the Business Cycle · 5 min read
1. Unit at a Glance
We build this unit from the ground up, starting with the most comprehensive measure of aggregate output: GDP. You will first learn how GDP is defined and measured, then how to adjust it for price changes to compare output across time. Next, we cover how to measure inflation and unemployment, the two other key indicators the Federal Reserve and policymakers track. We end by combining all three indicators to describe the repeating pattern of expansions and recessions that make up the business cycle.
Common Pitfalls
Why: Nominal GDP includes both price and output changes, so it can overstate or understate actual output growth
Why: GDP excludes non-market activity, income inequality, environmental harm, and leisure time
Why: Frictional and structural unemployment are unavoidable even at full employment