2) When any of these components consumption, investment, government spending and exports rises, the AD curve shifts to the right. A small rise in consumption takes place within consumer spending as road tax was reduce ,hence they have more spending money. But a fall in government spending occurs due to this tax cut. Cutting tax is an expansionary fiscal policy, it would have the effect of shifting the AD curve outwards. The government will be faced with the task of providing an alternative way to restore the money lost due to the tax cut. It may have to reduce its spending budget or borrow the funds from another financial source. The government spends more than it takes from taxes, in this case, it will be running on a budgetary deficit,
