The statement is correct. In a Layer 2 switched network, a loop in the topology without a loop-prevention mechanism like Spanning Tree Protocol (STP) will cause broadcast, unknown unicast, and multicast frames to be forwarded endlessly between switches. This continuous circulation of frames rapidly consumes available bandwidth and switch CPU resources, leading to a network outage known as a broadcast storm.

This question is a "TRUE OR FALSE" type. The provided statement is factually correct according to fundamental networking principles, so the "False" option would be incorrect.

1. Huawei, "HCIA-Datacom V1.0 Training Material," Document Version V1.0, Chapter: "Spanning Tree Protocol," Section: "Background of STP." This section explicitly describes how Layer 2 loops lead to broadcast storms, MAC address table instability, and duplicate frame transmission.

2. Kurose, J. F., & Ross, K. W. (2017). Computer Networking: A Top-Down Approach (7th ed.). Pearson. Chapter 6, "The Link Layer and LANs," discusses the function of link-layer switches and the problem of forwarding loops, which necessitate protocols like STP.