True: A weaker currency will result in higher inflation due to dearer imports. , An undervalued Chinese renminbi (yuan) implies lower inflationary pressures or the USA., In a fixed exchange rate system there is less uncertainty but the government is deprived of monetary policy. , In a floating exchange rate system trade imbalances tend to be corrected automatically, assuming proper elasticities. , False: Revaluation and appreciation both mean an increase in the value of a currency but the former is used in floating exchange rate system whereas the latter is reserved for a fixed system. , A growing economy will absorb more imports, leading to depreciating currency., If higher interest rates attract hot moneys into the country then the country with the highest interest rate will attract all hot money, If currency A appreciates by 100% against currency B, it follows that currency B depreciated by 100% against currency A. ,

Exchange Rate: True and False

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