Question

How, in general, can a financial crisis lead to a recession? What, in particular, precipitated the severe recession of 2007-2009? Include in your discussion what role the government, businesses, and consumers played in the economic downturn.

Answer 1

From what I know about the recession of 2008, it was started with the housing market. Too many people who could not afford to buy houses took out loans they could not afford and bought houses. Some took out an "insurance" from AIG for there loan, only to find out AIG could not afford to pay back the failed mortgages they insured. It just really messed with the national economy.