What was observed about labor markets during the Great Depression that was not explained by classical models? This was also what most models developed after the Great Depression tried to explain.

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Classical models predicted that labor markets would eventually reach equilibrium and unemployment would decrease. However, during the Great Depression, unemployment persisted for a long time, even though wages were decreasing. This observation could not be explained by classical models and led to the development of new models that incorporated factors such as sticky wages and imperfect information.

What Was Observed About Labor Markets During the Great Depression