The recession causes inflation rate fall and increase in unemployment rate. This is because the decline in output from Q1 to Q2 constitutes a recession, and since fewer worker are needed to produce the lower output, unemployment rate arises. None of the increase in output would be dissipated as inflation. The inflation rate fall by following the percentage in price of goods and services which are decrease. Global financial crisis was started in 2007, the impact of global financial crisis was finally starting to hit Malaysia in 2008. Malaysia’s government started give out some action which can be classified into 2 types of action. The action which is including stimulus package and policy changes, in order to cope with the changes in economy.

There are two economic stimulus packages that introduced by the government had worked successfully, this this mainly because that the first package, introduced to upgrade, repair, maintain facilities (including schools, hospitals, roads, dwelling quarters for police and armed forces, and police stations),
This is to ensure continued access to financing, Restructuring and Rescheduling of Credit Facilities, Pre-emptive measures to sustain confidence in financial sector, Avenues for borrowers to seek assistance and redress (Bank Negara Malaysia Annual Report, 2010). At the same time, another response to the crisis coming from the government is the monetary stimulus was introduced to reduce the cost of intermediation (Bank Negara Malaysia Annual Report, 2010). This stimulus plan is to help reduced Overnight Policy Rate by 150 basis points between November 2008 and February 2009 to 2.0% and to reduce Statutory Reserve Requirement by 300 basis points to