In the two-period SOE model, the current account surplus is equal to

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In the two-period small open economy (SOE) model, the current account surplus is equal to output minus consumption minus government spending. This is because the current account reflects a nation's net trade in goods and services, essentially capturing the difference between national savings and investment. When a country produces more than it consumes and spends in government expenditures, the surplus represents savings that can be lent abroad or used to increase the country's net foreign assets.

In the Two-Period SOE Model, the Current Account Surplus Is