This may be seen as an analogy for choices between defense and civilian spending in more complex economies. The "guns or butter" model is used generally as a simplification of national spending as a part of GDP.
It demonstrates the relationship between a nation's investment in defense and civilian goods. In macroeconomics, the guns versus butter model is an example of a simple production–possibility frontier. A, however, is inside of the PPF and represents a combination of output that is not utilizing all available resources. Points located along the PPF curve represent sustainable combinations of each type of production in a world where scarcity is a binding constrain. Points such as B, C, and D illustrate the trade-off between guns and butter: at these levels of production, producing more of one requires producing less of the other.
Points like X that are outside the PPF are impossible to achieve. The production possibilities frontier (PPF) for guns versus butter.
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