The pulsed nature of terahertz time-domain spectroscopy (THz-TDS) sets a fundamental limit on its spectral resolution. The spectral resolution of THz-TDS can be improved by increasing the duration of the temporal measurement, but is limited by the dynamic range of the system in the time domain. This paper presents calculations and experimental results relating the temporal dynamic range of a THz-TDS system to its spectral resolution. We discuss three typical terahertz sources in terms of their dynamic range and hence achievable spectral resolution.