2:
*I think that it is pretty. (less common)
*I think it is pretty. (more common)

Relative (adjectival) clause

In Indo-European languages, a relative clause, also called an adjectival clause or an adjective clause, meets three requirements:
#Like all dependent clauses, it contains a verb (and also a subject unless it is a non-finite dependent clause). However, in a pro-drop language the subject may be a zero pronoun:

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