For the one I have highlighted, the income is lower because we have started from a lower capital stock and therefore return on investment is lower initially, is this right?

Fig. 5.2 The effect of capital accumulation on investment, saving, and the real rate of interest S(Y', Y's,K') 1 S(Y , Y, r, k ) p- -- . - -- 1 ( ry, K ) S.I OKsuppose instead that we start from lower levels of capital and production K' and Y'. Such a situation is illustrated by the dashed lines. Since we have less capital, the return on investment is higher, so the investment schedule is further to the right. Since income is lower, savings are lower for a given interest rate, so the sav- ings schedule is further to the left. Thus we see that the real interest rate will be higher than p in this situation. Then we know, from our theory of consumption in Chapter 4, that households will save some of their income, so the capital stock will grow towards the steady state level