A horizontal LM-curve will also render monetary policy ineffective.

This is called the

liquidity trap. In this case, money demand is totally interest elastic, and the
parameter h in the money demand equation is assumed to be infinitely large.
A liquidity trap is a situation in which the public is willing to hold, at a given interest
rate, as much money as the Bank of Canada is willing to supply. In this case, the LMcurve is horizontal and monetary policy is totally ineffective. Fiscal policy (which
will shift the IScurve) is clearly the better choice to stimulate the economy in such a
situation, since no crowding out will occur. This means that fiscal policy will have its
maximum effect.
The fiscal policy multiplier is zero if the LM-curve is vertical. This case is called the
classical case, and money demand (and money supply) is assumed to be totally
interest insensitive.
In the classical case, the LM-curve is vertical at the full-employment level of output.
In this case, money demand (and money supply) would be completely interest
inelastic. After any type of disturbance, a return to an equilibrium in the money
sector could only be accomplished through changes in the level of output. In this
situation, fiscal policy would be completely ineffective, since it would be totally
crowded out. On the other hand, monetary policy would achieve its maximum
effect.
Crowding out occurs when an increase in government spending raises interest
rates, which reduces private spending (especially investment). For example, an
increase in government purchases (G) will increase income (Y) and therefore
consumption (C); but because the interest rate (i) will increase, the level of
investment spending (I), and most likely also net exports (NX), will decrease,
changing the composition of GDP. Some degree of crowding out will always occur as
long as the LM-curve is upward sloping, that is, in all cases except the liquidity trap.
The steeper the LM-curve is, the greater the degree of crowding out. This implies
that if the LM-curve is steep monetary policy will be more effective than fiscal policy
in stimulating national income.
http://homes.chass.utoronto.ca/~gindart/Chapter%2012%20-%20ECO209.pdf
Two extreme cases[edit]
Liquidity trap[edit]
If the economy is in a hypothesized liquidity trap, the LM curve[clarification needed]
is horizontal, an increase in government spending has its full multiplier effect on the
equilibrium income. There is no change in the interest associated with the change in
government spending, thus no investment spending cut off. Therefore no
dampening of the effects of increased government spending on income. If the
demand for money is very sensitive to interest rates, so that the LM curve is almost
horizontal, fiscal policy changes have a relatively large effect on output, while
monetary policy changes have little effect on the equilibrium output. So, if the LM
curve is horizontal, monetary policy has no impact on the equilibrium of the
economy and the fiscal policy has a maximal effect.

The Classical Case and crowding out[edit]

If the LM curve is vertical, then an increase in government spending has no effect
on the equilibrium income and only increases the interest rates. If the demand for
money is not related to the interest rate, as the vertical LM curve implies, then
there is unique level of income at which the money market is in equilibrium.

Thus, with vertical LM curve, an increase in government spending cannot change

the equilibrium income and only raises the equilibrium interest rates. But if
government spending is higher and the output is unchanged, there must be an
offsetting reduction in private spending. In this case, the increase in interest rates
crowds out an amount of private spending equal to increase in government
spending. Thus, there is full crowding out if LM is vertical.
https://en.wikipedia.org/wiki/Crowding_out_(economics)#Two_extreme_cases

Liquidity trap visualized in an ISLM diagram. A monetary expansion (the shift from
LM to LM') has no effect on equilibrium interest rates or output. However, fiscal

expansion (the shift from IS to IS") leads to a higher level of output with no change
in interest rates: Since interest rates are unchanged, there is no crowding out.