Usually I think people just answer with whatever their last job, or their favorite hopeful job would be. If they must say that they're not working, then a positive answer which might make it sound like a planned hiatus from work, might lessen the chances that they'll judge you as being unemployed for lazy reasons. Maybe to sound as if you're newly trained to take a higher job, and the one you qualify for, is going to open up in a few weeks or months.
If they ask me what I do, I can honestly answer several ways. I'm self-employed with my wife; we have an avocado ranch, and do OK with it, and also own and manage a couple of rental units. Some people would accuse us of "not working", but in fact, the stress and responsibility is more than it would be, in many "regular jobs". If somebody calls us at 3:00 AM, and says their toilet is overflowing, I have to go immediately to see about it. And if we don't keep ontop of the avocado business, and keep up on all of the constantly-changing USDA rules, etc., and know who to call for what services, it would fail, and there is no boss or supervisor to warn us. So it's a big responsibility. But when I tell anyone that I'm self-employed, they somehow think I mean I have no job, so sometimes I leave out the owner-operator part, and say "I'm a manager at an agricultural office", and that usually shuts them up with the questions. I never tell people I'm a landlord, or that we own apartments, because people don't think of that as "real work" either. At age 45, I won't have to wait more than 10 years and I'll just tell people I'm retired
Charles