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Understanding the Guns-and-Butter Curve & How It Works?

The guns-and-butter curve is a concept that demonstrates the economic idea of opportunity cost using a theoretical economy with only two goods. Every choice in production has an opportunity cost and cannot be produced outside the curve without an increase in productivity. The curve charts the tradeoff that occurs within the limits of production in a given economy. Military spending versus domestic production needs is a common example of this tradeoff. In the case of the Cold War-era, the Soviet Union heavily focused on military buildup, causing shortages in domestic necessities. The constraints of the guns-and-butter curve can be used to illustrate the strain put on nations that focused on military buildup while consumer goods suffered in response. 057e