(?) AS VERTICAL AXIS AD HORIZONTAL AXIS The horizontal axis of the model of aggregate demand and aggregate supply measures the overall The aggregate- curve shows the quantity of goods and services that firms produce and sell at each price level.13. Explaining short-run economic uctuations Host 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 V variable. will cause the price level. a V variable. to increase but will have no longrun effect on the quantity of goods and services the economy can produce. a V variable. The notion that an increase in the quantity of money will impact the price level but not the output level is known as V . However. most economists believe that in the short run real and nominal variables are intertwined. Economists use the model of aggregate demand and aggregate supply to examine the economy's shortrun uctuaons around the longrun output level. The following graph shows an incomplete short-run aggregatedemand (ADHaggregatesupply (AS) diagramit needs appropriate labels for the axes and curves. You will identify some of the missing labels in the questions that follow