Final answer:
The substance produced by the lungs that reduces surface tension is called surfactant, which is vital for proper respiratory function by facilitating alveolar expansion and preventing collapse.
Step-by-step explanation:
The substance produced by the lungs to reduce surface tension is called surfactant. Surfactant is a complex mixture of phospholipids and lipoproteins that acts to lower the surface tension at the liquid-air interface of the alveoli, the small air sacs in the lungs where gas exchange occurs. This reduction in surface tension is critical for allowing the alveoli to expand properly during inhalation and preventing their collapse during exhalation.