The higher interest rates cause it to be more difficult for businesses and consumers to borrow, reducing overall demand in the economy. In the short run, AD shifts left, Y falls and P falls. Because the economy is now in a recession, unemployment increases and eventually wages fall.
Unemployment falls due to the high level of production.
Eventually, wages rise, the SRAS shifts left and output falls back to its natural rate. P and Y fall. If the shock is temporary, the SRAS curve will shift back to its original position when oil prices return to normal. If the shock is permanent, there may be a shift in the LRAS curve that will permanently change output levels. However, the tax increase will partially offset this fall in savings.