This diagram has Aggregate Demand on the vertical axis and Income on the horizontal axis.

A solid line slopes upwards from the origin at an angle of 44 degrees.

From a point a short way up the vertical axis, a horizontal line is drawn. This is labelled ‘I+G’.

From a point a little higher up the vertical axis, labelled ‘a’, a solid straight line slopes upwards diagonally to the right. This line is labelled ‘Consumption function’ and has the equation C=a+b(1-t)Y. It has quite a shallow slope.

Higher up the vertical axis, from a point labelled ‘a+I+G’, there is another upward sloping line, parallel to the consumption function. This line is labelled ‘Aggregate Demand schedule’ and has the equation AD= a+b(1-t)Y+I+G