Other countries, esp. The value of the U.S. dollar may drop as a result. This makes imports more expensive. One reason why the U.S. has been able to run a large trade deficit without reducing the value of the dollar is that the dollar has been used as an international currency, for transactions between other countries. When the European Economic Community adopts a single currency, this may change.
Specialization increases total output.
Classtalk Exercise Consider the production possibilities curve for bread and wine in the U.S. and France. 8 First calculate the opportunity cost of one barrel of wine in the U.S. To produce 50 zillion barrels you have to give up 100 zillion loaves. To produce 60 zillion barrels in France you must give up 15 zillion loaves. Clearly the U.S. is better off selling its bread to France and buying wine, as long as the cost of a barrel is less than 2 loaves of bread.