Would the classical model of the price level be relevant if there is a great deal of unemployment in the economy and no history of inflation?

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1226777

2026-08-01 14:56

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No - The classical model is only realistic during periods of high inflation, because the stickiness of nominal wages and prices rise. This results in the Aggregate Supply Curve shifting left to it's next long-run equilibrium level much more quickly than during periods of low inflation.

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