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A model for the economy of the State of Oregon viewed as a small open entity in the larger U.S. economy is proposed here with both production and capital formation simulated by continuous, dynamic submodels. Economic activity is modeled on a sectoral (industry) basis, and an inventory concept is used to both separate the transient behavior of supply and demand and to generate price levels. Wage rates and natural resource prices are generated internally, while export demands are supplied exogenously. The capital formation is achieved using an adaptation of models by Phillips  and Bergstrom .