The figure below shows the effect of a 2001 increase in government purchases on the hypothetical path of real GDP compared to the path of potential GDP (the baseline) between 2001 and 2005. 
(A)Using the AD curve and IA line analysis, explain what is occurring between 2001 and 2002.
(B)Using the AD curve and IA line analysis, explain what is occurring between 2002 and 2004.
(C)Using the AD curve and IA line analysis, explain what is occurring between 2004 and 2005.
Definitions:
Stare Decisis
A legal principle that mandates courts to follow the rulings of previous cases in similar circumstances to ensure consistency in the law.
American Legal System
A system of laws and legal institutions that govern the United States, including the Constitution, statutes, regulations, and court decisions.
Appeals Court
A court that reviews decisions made by lower courts to determine if legal errors were made that could change the outcome of a decision.
Minnesota Administrative Code
A compilation of the rules and regulations enacted by agencies of the state of Minnesota to govern conduct within the state.
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