(Question 1) How does an externality (Define the term, please, which can be by use of an example) affect the market outcome?
(Question 2) Is it possible for a government's solution to a market failure to actually worsen the failure? For example, consider that the Federal Reserve added 200 billion dollars to the mortgage market to improve the liquidity of fund available to finance mortgages (It now plans to add up to $700 billion more through the purchase of preferred stocks in the U.S. banking system). Please explain your answer.