Households facing uncertain income levels can impact the economy significantly. A study found that high income risk for households can lead to lower overall economic activity. By analyzing a model with different types of households and sticky prices, researchers discovered that increased precautionary savings due to income uncertainty can reduce demand and cause output losses, especially during economic downturns. This effect is more pronounced when the central bank is limited in its ability to lower interest rates. The findings suggest that household income uncertainty played a role in the decrease in consumer spending during the Great Recession.