Final answer:
The peak of a business cycle followed by a downturn or recession is indeed true, marking the contraction phase of the economic fluctuations that characterize business cycles.
Step-by-step explanation:
The statement that the peak of a business cycle is followed by a downturn or recession is true. A recession is described as the period of contraction in the business cycle. This period begins right after the economy hits its peak level of activity, indicating a time of robust economic growth or expansion, and continues until it reaches its trough, which is the lowest point before an economic recovery or upswing commences.
The National Bureau of Economic Research (NBER) defines a recession as starting from the peak and ending at the trough. Furthermore, it's interesting to note that some of the longest expansions in U.S. economic history have occurred since 1960. For example, the expansion following the Great Recession of December 2007 to June 2009, which was a severe downturn since the 1930s Great Depression, lasted from June 2009 to February 2020, a period of 128 months.
Recessions are important to identify as they are part of the business cycles that include both expansions and contractions of the economy, which occur around a long-term growth trend. These fluctuations can be visualized effectively with a graph that juxtaposes periods of economic growth against those of decline.