Does "Output 1" mean that there will be a new "Input" for Alice's account?
Yes, but it is Alice wallet.
Assuming you are Alive, you were sent 1 BTC, you sent 0.4 BTC to Bob, the 0.4 BTC output you sent to Bob will becoming input for Bob and Bob will be able to spend from it. But not only that, the remaining 0.6 BTC will be sent back to change address on your wallet which is what you are referring to. Anytime you want to spend again, you can spend from the change address.