The Triffin Paradox states that ________.

Question

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The Triffin Paradox states that the more that foreigners rely on the U.S. dollar to expand trade, the less confidence they have that the U.S. can honor its commitment of redeeming dollars for gold. This is because the U.S. must continuously run trade deficits to supply the world with dollars, which in turn puts pressure on the gold reserves backing those dollars. This paradox puts the U.S. in a difficult position, as it must choose between running trade deficits to meet global demand for dollars or tightening monetary policy to maintain confidence in its currency.

The Triffin Paradox States That ________