Question

Most economists believe that real economic variables and nominal economic variables behave independently of each other in the long run. For example, an increase in the money supply, a 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 distinction between real variables and nominal variables is known as .

Answer 1

The distinction between real variables and nominal variables is known as inflation rate.

Step-by-step explanation:

The inflation rate is what distinguishes real variables (such as increase or decrease in prices/price level of goods or services) from nominal variables (such as the quantity of available money: high or low money supply). Real variables, which are affected by nominal variables, are actually nominal variables that have been adjusted for inflation.