An adverse oil-price shock reduces labor demand.What happens to current employment and the real wage rate?

Question

Quizplus · Accepted Answer

An adverse oil-price shock, which increases production costs, typically leads to a reduction in labor demand as firms try to cut costs. This reduction in labor demand would lead to both a decrease in employment and a decrease in the real wage rate, as the supply of labor exceeds demand.

An Adverse Oil-Price Shock Reduces Labor Demand