Question

In a press release during the Great Recession, the National Federation of Independent Business, which calculates the Small Business Optimism Index, stated "The Small Business Optimism Index rose just 0.1 points in January… . Historically, optimism remains at recession levels. While small business owners appeared less pessimistic about the outlook for business conditions and real sales growth, that optimism did not materialize in hiring or increased inventories plans." Would this statement seem familiar to a Keynesian economist? Which conclusion would a Keynesian economist draw for the need for public policy?

Short answer

The statement is familiar to Keynesian economists, and the conclusion that can be drawn is that the government's intervention is necessary during recessionary pressures.

Step-by-step solution

Step 1. Reason behind the familiarity of the sentence to that of a Keynesian economist

The statement is indeed based on the beliefs of Keynesian economists. It is because they always prioritize the optimistic and pessimistic attitudes of the businesses as these attitudes change with the changes in the economic scenarios.

Step 2. The conclusion which a Keynesian economist draw to implement a public policy

A Keynesian economist can conclude about a public policy by saying that during times of economic slowdown or when recessionary pressures grow, the government must intervene to implement expansionary fiscal policy. During recessionary pressures, the business confidence stays at very low levels, and when the government intervenes, the business confidence rises.