When the business cycle is reduced and cut back, this is often referred to as a recession which generally slows down the economic activity during a particular period of time .When recessions occur, it has been believed that there is a general drop in spending, and governments normally address this financial matter by implementing macroeconomic policies which deal with the economy’s performance and behaviour to be able to understand how the whole economy functions (Strupczewski 2004). Furthermore, governments also increase the supply of money as well as government spending, and decreases taxation. According to the NBER or the National Bureau of Economic Research, an economic recession normally lasts for more than a few months which will be evident in the GDP growth as well as in personal incomes, employment rates, production, business profits and sales which all fall and drop during this critical slump.
The latest economic recession in 2008 first began in December of 2007 in the United States and was greatly intensified in September of 2008 (Gullapalli and Anand 2008). This particular financial crisis had been described by numerous imbalances and had been associated with hasty and unstable lending practises which resulted from the interference of the United States government regarding real estate mortgages. The US securities which were backed by mortgages were sold around the world despite the fact that it had risks which were hard to evaluate.