This happens due to the real balance effect that states the inverse relationship between price level and quantity demanded of Real GDP established through the changes in the value of monetary wealth (McConnell & Brue, 2008). As the price level in the economy increases, the purchasing power, and monetary wealth of households and businesses declines, thus resulting in a decline in quantity demanded of goods and services in the economy. Furthermore, high oil prices would then spread throughout the economy, driving up production and distribution costs on a wide variety of goods that will induce firms to reduce output (McConnell & Brue, 2008). in turn will affect to the number of labour employed in the economy. The increase in production and distribution costs would be caused by factors such as the rise in expected price level, workers demanding higher wages (wage push).