I don’t know what diagram you are referring to… perhaps an economics model?
I will answer the practical side of this question. If the interest rate goes up, the cost of obtaining goes up… Your credit card interest goes up, your adjustable mortgages can go up. Consumers will be left with smaller disposable income and will have to decrease their spending. Thus retail sales can be hurt.
You can think of it as a trade-off between consumption and savings (investment). Since the return from savings in the form of higher interest rate is higher households may choose to invest (save) more at the expense of their consumption, i.e. retail trade will decrease.
I don’t know what diagram you are referring to… perhaps an economics model?
I will answer the practical side of this question. If the interest rate goes up, the cost of obtaining goes up… Your credit card interest goes up, your adjustable mortgages can go up. Consumers will be left with smaller disposable income and will have to decrease their spending. Thus retail sales can be hurt.
You can think of it as a trade-off between consumption and savings (investment). Since the return from savings in the form of higher interest rate is higher households may choose to invest (save) more at the expense of their consumption, i.e. retail trade will decrease.