Friday, March 17, 2017

Understanding Trump Government Spending via the Guns And Butter Curve

The guns and butter curve is the classic macoeconomic example of the production possibility curve for a given period. In a theoretical economy with only two goods, at full production (the curve), production must be split between how much of each good can be produced. As an economy produces more guns (military spending) it must reduce its production of butter (food), and vice versa.

Trump's proposed U.S. government budget does not shrink the size of governemnt spending but simply moves along the Guns and Butter Curve more in the direction of  spending on guns (military spending).


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