Final answer:
A budget deficit is a problem associated with fiscal policy that can lead to inflation, crowding out private investment, and reliance on unstable international capital inflows.
Step-by-step explanation:
A problem that may arise in connection with fiscal policy is a budget deficit. When the government spends more than it collects in taxes, it results in a deficit that needs to be financed, often by borrowing. This situation can lead to several negative macroeconomic outcomes. First, a sustained budget deficit can lead to higher inflation rates as aggregate demand shifts to the right, increasing the price level. Secondly, a budget deficit can crowd out private investment as the government borrows funds that would otherwise be available for private sector investment, which can slow down economic growth. Lastly, a persistent deficit may create a dependency on international capital inflows, which, if reversed, can damage the economy.