Earlier discussions of the international sector were conducted in the context of a non-inflationary environment, both in the United States and in the rest of the world. Although relaxing this simplifying assumption does not undo the lessons we learned earlier, it does allow us to modify them to explain some anomalies. The purpose of this chapter is to explain a general rule of thumb, called purchasing power parity, that can provide a guide to to the behavior of an economy's exchange rate over the long run in an inflationary environment.