Problem. 06: Suppose that the current spot exchange rate of US dollars for Australian dollars, SUSS/AS, is .7590 (i.c.0.759 dollars, or 75.9 cents can be received for AST). The price of Australian-produced goods increases by 5 per cent (i.e. inflation in Australia, IPA, is 5 per cent), and the US price index increases by 3 per cent (ieinflation in the United States, IPUS, is 3 per cent). Calculate the new spot exchange rate of US dollars for Australian dollars that should result from the differences in inflation rates. Solution