You have 2 questions, one is the "title question" and another is the "foot note question" after elaborating your problem.
Read this documentation bellow to get a better understanding of CLASSPATH.
https://docs.oracle.com/javase/tutorial/essential/environment/index.html
https://docs.oracle.com/javase/8/docs/technotes/tools/windows/classpath.html
This is fast and straight forward for what you need.
For your first question, this will do:
The documentation recommends us to set a classpath for every application we are running at the moment using (use in the command-line):
java -classpath C:\yourDirectoryPath myApp
For your second question, look this exercise in the java documentation. It seems to be the same problem:
https://docs.oracle.com/javase/tutorial/essential/environment/QandE/answers.html
Answers to Questions and Exercises: The Platform Environment
Question 1.A programmer installs a new library contained in a .jar file. In order to access the library from his code, he sets the CLASSPATH environment variable to point to the new .jar file. Now he finds that he gets an error message when he tries to launch simple applications:
java Hello
Exception in thread "main" java.lang.NoClassDefFoundError: Hello
In this case, the Hello class is compiled into a .class file in the current directory — yet the java command can't seem to find it. What's going wrong?
Answer 1. A class is only found if it appears in the class path. By default, the class path consists of the current directory. If the CLASSPATH environment variable is set, and doesn't include the current directory, the launcher can no longer find classes in the current directory. The solution is to change the CLASSPATH variable to include the current directory. For example, if the CLASSPATH value is c:\java\newLibrary.jar (Windows) or /home/me/newLibrary.jar (UNIX or Linux) it needs to be changed to .;c:\java\newLibrary.jar or .:/home/me/newLibrary.jar."