What does the classical model predict about the behavior of price levels in business cycles?

Answer 1

The classical model predicted (or rather, correctly observed) that price levels fall during recessions and rise during expansions. Over time, however, this behavior changed. Price levels became relatively inflexible (today, we refer to this phenomenon as "sticky prices"), while cyclical adjustment began to happen through changes in employment rather than in price levels. In Britain, this occurred about 1850; most other industrialized nations followed by 1870 or 1880. It took economists a while to realize what was going on; Keynes was the first to point it out...

Answer 2

In the business model there is a system of highs and lows. In a high, there is inflation increasing the price.However, since people are making more money they can afford the inflation. The opposite is for a low. I am 14 and i know this. I read buisnessweek weekly and watch CNBC nightly. I was the salutitioran of my class. Come on, you should know this.