Throughout this course, we've been focusing on what's called the Keynesian model of economics, based on the studies of John Maynard Keynes. Before that, they used the classical model of Economics. Let's learn some of the key differences and similarities between these models. So let's start here with the classical model. And this is basically the original foundation of economics, and it was used primarily before the Great Depression. And this was developed generally first by, we'll say Adam Smith in the Wealth of Nations. This is where a lot of these ideas came from in the classical model of economics. So this model had a flexible approach to prices and wages, okay? So everything was flexible. Wages can move up and down at any point in time. Prices moved up and down based on the laws of supply and demand, okay? So based on current financial conditions, prices and wages would quickly move to adjust to those conditions. So in a recession, right? The prices would fall. In an expansion, prices would rise along with wages. Everything would be moving. And the economy was also assumed to be always at full employment. There was always full employment. Anyone who wanted a job could get a job and all resources were being used, right? So this economy was said to be self-correcting, needing no intervention. This is the big thing about the classical model. That they said that there was what we call the invisible hand. It's said, to be the invisible hand of the market would fix any problems that the market fix. If you're going through inflation, well, the market would fix itself over time. If you're going through a recession, the market's gonna fix itself as well. This is said to be called what we say is laissez-faire, laissez-faire economics. And this is just this no intervention policy, allowing things to run their course without intervention. Okay? That's the big thing with the classical model is those flexible prices and no intervention. Okay? So as a metaphor, we're going to compare the classical and Keynesian models with the metaphor. So imagine you're Imagine there's a busy highway with a 60-mile per hour speed limit. During rush hour, which we're gonna assume is a recession here, during rush hour, the freeway is packed and no one can actually go the speed limit, right? We're going through a recession, but eventually, as time passes, people leave the highway. It'll clear up again, right? And this is that self-correcting. After a while, the highway clears up and everyone can go the speed limit again and everything's back to normal, right? So the recession happens, you don't intervene at all. Eventually, it clears up and we move on. Okay? So that's the whole thing with the classical model. Remember, there's no intervention and it's flexible, prices, and wages. Cool? Let's pause here and then let's talk about the Keynesian model in the next video.