For each of the following, use an ADI LA diagram to show the short-run and long-run effects on output and inflation. Assume the economy starts in long-run equilibrium. LO3,LO4, Los a. An increase in autonomous consumption. b. A reduction in taxes. c. An easing of monetary policy by the Bank of Canada (a downward shift in the monetary policy rule). d. A sharp drop in oil prices. e. A war that raises government purchases. Solution ADI (Aggregate Demand/inflation) curve represents the relationships between short-run equilibrium output Y and the rate of inflation. Whereas, IA (Inflation adjustment) curve is a horizontal line showing the current rate of inflation, as determined by past expectations and pricing decisions. The aggregate demand.