Legislation proposes that the government should use macroeconomic policy to achieve an unemployment rate of zero percent, by increasing aggregate demand for as much and as long as necessary to accomplish this goal. From a neoclassical perspective, how will this policy affect output and the price level in the short run and in the long run? Sketch an aggregate demand/aggregate supply diagram to illustrate your answer. 

Figure 26.4

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Price Level (base year = 100) 135 130 125 120 115 110 105 100 95 90 0 LRASn ur √ E₁ SRAS, SRAS E₁ AD. AD, 100 200 300 400 500 600 700 800 Real GDP (billions of constant dollars)