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Which of the following statements best describes the term ‘Triffin dilemma’?
- a)Role of government intervention and fiscal policy to stabilize the economy and prevent recessions.
- b)A framework for understanding how to strike a balance between cooperation and competition for strategic decision-making.
- c)Conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies.
- d)None of the above
Correct answer is option 'C'. Can you explain this answer?
Verified Answer
Which of the following statements best describes the term ‘Triff...
- As the Government of India presses ahead with its plan to internationalise the Indian Rupee (INR), an Inter-Departmental Group (IDG) of officials of the Reserve Bank of India (RBI) have in a report cautioned that internationalisation may result in increased volatility in the rupee’s exchange rate in the initial stages.
- “This would further have monetary implications as the obligation of a country to supply its currency to meet the global demand may come in conflict with its domestic monetary policies, popularly known as the Triffin dilemma,” the IDG wrote.
- The Triffin dilemma or Triffin paradox is the conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies.
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Which of the following statements best describes the term ‘Triff...
Explanation:
The Triffin dilemma refers to the conflict of economic interests that arises between short-term domestic objectives and long-term international objectives for countries whose currencies serve as global reserve currencies. Here's a detailed explanation:
Short-term Domestic Objectives:
- Countries that have their currencies serving as global reserve currencies often face the pressure to maintain low interest rates and provide liquidity to the global economy to stimulate growth. This is in the short-term interest of these countries as it helps boost their own economic performance and maintain their currency's status as a reserve currency.
Long-term International Objectives:
- However, in the long term, this practice can lead to a build-up of imbalances and vulnerabilities in the global financial system. By running persistent trade deficits to supply enough of their currency to meet global demand, these countries risk eroding confidence in their currency and destabilizing the international monetary system.
Resolution of the Dilemma:
- The Triffin dilemma highlights the inherent tension between the need for global liquidity and the stability of the international monetary system. It underscores the challenges faced by countries like the United States, whose currency, the US dollar, serves as the world's primary reserve currency. Balancing short-term domestic objectives with long-term international considerations is crucial to address this dilemma effectively.
In conclusion, the Triffin dilemma encapsulates the complex trade-offs that countries with global reserve currencies must navigate to ensure economic stability both domestically and internationally.
The Triffin dilemma refers to the conflict of economic interests that arises between short-term domestic objectives and long-term international objectives for countries whose currencies serve as global reserve currencies. Here's a detailed explanation:
Short-term Domestic Objectives:
- Countries that have their currencies serving as global reserve currencies often face the pressure to maintain low interest rates and provide liquidity to the global economy to stimulate growth. This is in the short-term interest of these countries as it helps boost their own economic performance and maintain their currency's status as a reserve currency.
Long-term International Objectives:
- However, in the long term, this practice can lead to a build-up of imbalances and vulnerabilities in the global financial system. By running persistent trade deficits to supply enough of their currency to meet global demand, these countries risk eroding confidence in their currency and destabilizing the international monetary system.
Resolution of the Dilemma:
- The Triffin dilemma highlights the inherent tension between the need for global liquidity and the stability of the international monetary system. It underscores the challenges faced by countries like the United States, whose currency, the US dollar, serves as the world's primary reserve currency. Balancing short-term domestic objectives with long-term international considerations is crucial to address this dilemma effectively.
In conclusion, the Triffin dilemma encapsulates the complex trade-offs that countries with global reserve currencies must navigate to ensure economic stability both domestically and internationally.
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Which of the following statements best describes the term ‘Triff...
The Triffin dilemma
The Triffin dilemma refers to the conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies.
Explanation
- When a country's currency serves as a global reserve currency, it needs to provide enough of its currency to meet international demand. This requires running persistent trade deficits, which involves exporting more goods and services than importing.
- However, this can lead to economic imbalances in the long run, as the country may experience rising debt levels and a loss of competitiveness in its domestic industries.
- This dilemma was highlighted by economist Robert Triffin in the mid-20th century, as he observed that the US dollar, which served as the global reserve currency at the time, faced this dilemma.
- The Triffin dilemma raises concerns about the sustainability of the international monetary system, as countries that issue global reserve currencies may face conflicting objectives between domestic economic stability and international monetary system stability.
Conclusion
In conclusion, the Triffin dilemma underscores the challenges faced by countries whose currencies serve as global reserve currencies in balancing their domestic economic interests with their international responsibilities. Addressing this dilemma requires careful coordination and cooperation among countries to ensure the stability of the international monetary system.
The Triffin dilemma refers to the conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies.
Explanation
- When a country's currency serves as a global reserve currency, it needs to provide enough of its currency to meet international demand. This requires running persistent trade deficits, which involves exporting more goods and services than importing.
- However, this can lead to economic imbalances in the long run, as the country may experience rising debt levels and a loss of competitiveness in its domestic industries.
- This dilemma was highlighted by economist Robert Triffin in the mid-20th century, as he observed that the US dollar, which served as the global reserve currency at the time, faced this dilemma.
- The Triffin dilemma raises concerns about the sustainability of the international monetary system, as countries that issue global reserve currencies may face conflicting objectives between domestic economic stability and international monetary system stability.
Conclusion
In conclusion, the Triffin dilemma underscores the challenges faced by countries whose currencies serve as global reserve currencies in balancing their domestic economic interests with their international responsibilities. Addressing this dilemma requires careful coordination and cooperation among countries to ensure the stability of the international monetary system.
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Which of the following statements best describes the term ‘Triffin dilemma’?a)Role of government intervention and fiscal policy to stabilize the economy and prevent recessions.b)A framework for understanding how to strike a balance between cooperation and competition for strategic decision-making.c)Conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies.d)None of the aboveCorrect answer is option 'C'. Can you explain this answer?
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Which of the following statements best describes the term ‘Triffin dilemma’?a)Role of government intervention and fiscal policy to stabilize the economy and prevent recessions.b)A framework for understanding how to strike a balance between cooperation and competition for strategic decision-making.c)Conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies.d)None of the aboveCorrect answer is option 'C'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Which of the following statements best describes the term ‘Triffin dilemma’?a)Role of government intervention and fiscal policy to stabilize the economy and prevent recessions.b)A framework for understanding how to strike a balance between cooperation and competition for strategic decision-making.c)Conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies.d)None of the aboveCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following statements best describes the term ‘Triffin dilemma’?a)Role of government intervention and fiscal policy to stabilize the economy and prevent recessions.b)A framework for understanding how to strike a balance between cooperation and competition for strategic decision-making.c)Conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies.d)None of the aboveCorrect answer is option 'C'. Can you explain this answer?.
Which of the following statements best describes the term ‘Triffin dilemma’?a)Role of government intervention and fiscal policy to stabilize the economy and prevent recessions.b)A framework for understanding how to strike a balance between cooperation and competition for strategic decision-making.c)Conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies.d)None of the aboveCorrect answer is option 'C'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Which of the following statements best describes the term ‘Triffin dilemma’?a)Role of government intervention and fiscal policy to stabilize the economy and prevent recessions.b)A framework for understanding how to strike a balance between cooperation and competition for strategic decision-making.c)Conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies.d)None of the aboveCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following statements best describes the term ‘Triffin dilemma’?a)Role of government intervention and fiscal policy to stabilize the economy and prevent recessions.b)A framework for understanding how to strike a balance between cooperation and competition for strategic decision-making.c)Conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies.d)None of the aboveCorrect answer is option 'C'. Can you explain this answer?.
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