Which of the following statements is true?

Statement 1- The Keynesian theory believes that full employment is a normal feature of a capitalist economy.

Statement 2- The classical economists believed that full employment is an ideal situation, but an economy can be in equilibrium even at less than full employment level.

Neither statement 1 nor statement 2 is true

The correct answer is option 4: Neither statement 1 nor statement 2 is true

Statement 1- The Keynesian theory believes that full employment is a normal feature of a capitalist economy. This is false. The Classical economists believed that full employment is a normal feature of a capitalist economy. Keynes rejected the classical view that full employment is automatic or normal. He argued that economies can settle at less than full employment equilibrium, especially during recessions or depressions.

Statement 2- The classical economists believed that full employment is an ideal situation, but an economy can be in equilibrium even at less than full employment level. This is false. Keynesian theory believed that full employment is an ideal situation, but an economy can be in equilibrium even at less than full employment level.