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This diagram has Aggregate Demand (AD) on the vertical axis and Income (Y) on the horizontal axis.

A solid line at a 45 degree angle is drawn upwards from the origin.

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

A little above this horizontal line, from point ‘a’ on the vertical axis, a straight line is drawn upwards, with a shallower slope than the 45 degree line. This is labelled ‘Consumption function, C=a+bY.’

Somewhat above the consumption function, and parallel to it, is a line drawn from a point on the vertical axis a+I+G. This line is labelled ‘Aggregate Demand schedule, AD=C+I+G.’

 6.3 Government expenditure (3)