Homework (Ch 20) 2. Explaining short-run economic fluctuations Most economists believe that real economic variables and nominal economie variables behave independently of each other in the long run. For example, an increase in the money supply, _ variable, will cause the price level, a variable, to increase but will have no long-run effect on the quantity of goods and services the economy can produce, a variable. The notion that an increase in the quantity of money will impact the price level but not the output level is known as In the short run, however, most economists believe that real and nominal variables are intertwined. Economists use the model of aggregate demand and aggregate supply to examine the economy's short-run fluctuations around the long-run output level. The following graph shows an incomplete short-run aggregate demand (AD) and aggregate supply (AS) diagram-It needs appropriate labels for the axes and curves. You will identify some at the missing labels in the questions that follow. AS Homework Ch 201 VERTICAL AND 40 HORZONTAL AXIS The verticalads of the agregate demand and appregate supply model measures the overal The aggregate curve shows the quantity of goods and services that firms produce and sel at each price level