Guido arrives at the school before the hour he knows the inspector is due to get there. Wearing a ridiculous sash and walking his most self-important walk, he claims to be the inspector.
He asks the other teachers simple questions about being teachers, but when he comes to Dora, he asks he what she's doing this Sunday. She says she's going to see Offenbach at the theater.
The principal tells the students that Guido will now teach them about Italy's new race manifesto—a document stating why the Aryan race is super awesome compared to all others.
Guido jumps up on the table and gives the speech. He uses his "handsome" body as an example of the superiority of Italians. Of course, he's Jewish, so he doesn't believe a word of it. It's dramatic irony for the win.
As the teachers look on, aghast, Guido starts to undress. The actual inspector shows up right when Guido is using his belly button to prove how awesome he is as a specimen of race.
Realizing the gig is up, Guido exits out the window like an underwear-clad ninja.