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 _____(real/nominal) variable, will cause the price level, a _____(real/nominal) variable, to increase but will have no long-run effect on the quantity of goods and services the economy can produce, a _____(real/nominal) variable. The distinction between real variables and nominal variables is known as the _____________(price neutrality/monetary neutrality/the quantity theory).

Answer 1

Nominal;nominal;real;the quantity theory.

Step-by-step explanation:

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 nominal variable, will cause the price level, a nominal variable, to increase but will have no long-run effect on the quantity of goods and services the economy can produce, a real variable. The distinction between real variables and nominal variables is known as the quantity theory.