AP Macro Unit 2 Review: Economic Indicators and the Business Cycle
AP Macro Unit 2 covers GDP and the circular flow, unemployment, inflation and price indices, real vs nominal values, and the business cycle. Worth 12–17% of the exam, it defines the measurements every later unit uses.
What's in Unit 2
- 1Circular flow and GDP (expenditure and income approaches)
- 2Limitations of GDP
- 3Unemployment (types, and the unemployment rate)
- 4Price indices and inflation (CPI)
- 5Costs of inflation
- 6Real vs nominal GDP
- 7Business cycles
Study this unit free on EconLearn
Measuring national output, GDP components, and real vs. nominal.
Full lesson, practice questions & flashcards →Types of unemployment, CPI, and the Phillips curve.
Full lesson, practice questions & flashcards →Expansions, peaks, contractions, troughs, and economic indicators.
Full lesson, practice questions & flashcards →What to master for the exam
- Know what counts in GDP (final goods, produced this year, inside the country) and what does not (transfers, used goods, intermediate goods).
- Classify unemployment as frictional, structural, or cyclical — the natural rate includes only the first two.
- Calculate inflation with CPI and convert nominal to real using the deflator or real = nominal ÷ price index × 100.
- Label the business cycle phases (expansion, peak, contraction/recession, trough) and tie them to output gaps.
AP Macro Unit 2: common questions
What is on AP Macro Unit 2?
GDP measurement and the circular flow, GDP's limitations, the three types of unemployment and the unemployment rate, CPI and inflation, real vs nominal GDP, and the phases of the business cycle. It is worth 12–17% of the AP Macro exam.
What are the four phases of the business cycle?
Expansion (rising real GDP), peak (the top, where an inflationary gap is most likely), contraction or recession (falling real GDP with rising cyclical unemployment), and trough (the bottom, where recovery begins). Actual output fluctuates around the long-run growth trend of potential output.