In 2009, the inflation rate reached negative 0.4 percent while the unemployment rate hit 10 percent. If the target inflation rate was 2 percent and the full-employment rate of unemployment was 5 percent, what value does the Taylor Rule predict for the Fed’s target interest rate back then? Would that rate have been possible given the zero lower bound problem?

a. negative 4.6 percent, not possible.

b. positive 0.4 percent, possible.

c. negative 5.6 percent, not possible.

d. positive 6.4, possible.