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The world economy is facing its worst Financial Crisis ever. The magnitude and impact shall be even larger than great depression. The over capacities created by the manufacturers, the collapse of an international financial corporation shall bring in grave danger to the world economies. History shows that while disasters often have catastrophic human effects, the economies of affected nations often recover quickly. The main objective behind this research project was to generate a better qualitative understanding of economic issues to help the decision makers in coping with future problems. In order to accomplish the objectives of this report, we have used the Survey reports of different government departments. The report is based on the personal observation, articles, survey reports, news papers and research documents published by various economists. The main findings and recommendations were to stabilize the financial system through Recapitalize the financial sector by a transfer of wealth from the taxpayers to banks and brokers. Close defunct or weakening financial institutions under new bankruptcy legislation, under which the courts could act with extraordinary speed and authority. This should involve replace managements. New managements could be selected by a bi-partisan committee of business leaders that should have only a minority of members from the financial industry. To stabilize the economy, set up the job training and education programs now, rather than throw them together in haste when they are needed yesterday. Work with the States now to prepare the necessary legal and financial apparatus to handle these. Regulatory authorities should take prudent measures to stabilise the system irrespective of political and social pressures. Financial institutions as well as individuals need to be cautious especially in period of boom, because in business cycle, boom is followed by recession as evident in the global financial crises. Individuals should be educated about when and how much to consume or invest. With reference to Pakistan, economic stability is of key importance. Surrounded by enemy at west as well as east, it has to allocate major portion of its revenue to defence. Internal law and order situation is getting worse day by day repelling the potential foreign investors. It was never relieved from natural disasters as well. With rising political instability, and economy which was never stable since establishment of Pakistan, condition doesnt seem satisfactory. Price stability, regulation of financial markets, and employment, all are responsibilities of government. Rulers with aim to bring progress and prosperity to nation should develop trust and civic sense among citizens so that their suggestions in hour of need are heard and acknowledged.