Statement 1 is false;

This is because as much as monetary policy is ineffective when aggregate supply is horizontal, fiscal
policy is effective. When government expenditure is increased for instance, consumption and
investment increased, creating a shift to the right in the aggregate demand curve. despite the supply
curve being horizontal, output will increase.
This is not the case for monetary policy, since an expansionary monetary policy will not have any
effect on the interest rates because of the horizontal supply curve, which is the channel through
which investments ought to increase.

Statement 2 is true
According to classical economists, the Laissez-faire approach of an economy helps in the adjustment
of employment in the economy and ensures full employment is maintained. believe that there is no
unemployment and that those who are willing to work will get work because supply creates its own
demand according to them.