I develop an intertemporal general equilibrium two-sector model for a small
dependent economy. Firms in the non-tradable-good sector are assumed to be
large, both at the industry and the economy levels, and to compete over qu
antities. The exchange rate is fixed and financial capital is perfectly mob
ile. I study the effects of government purchases of goods on the macroecono
mic short- and long-run equilibria when entry is possible, Sufficient condi
tions for welfare improvement are also derived.