Suppose that the current spot exchange rate of U.S. dollars for Australian dollars, SUS$/A$, is 0.757 (i.e., $0.757 can be received for 1 Australian dollar). The price of Australian-produced goods increases by 5 percent (i.e., inflation in Australia, IPA, is 5 percent), and the U.S.

price index increases by 3 percent (i.e., inflation in the United States, IPUS, is 3 percent). Calculate the new spot exchange rate of U.S.

dollars for Australian dollars that should result from the differences in inflation rates. (LG 9-7)

 LO.1