[Deleted because this question is from a banned source - see below.]

The answer to the question is A and is rightly so.
My concern is can a verb (ing) follow a possesive case or it always has to be a noun.

Specifically can reducing (verb) follow possesive noun (Federal Reserve Board’s)

Thanks
Roger

Please read (and follow!) the forum guidelines before posting. 1000SC is a banned source because it illegally uses copyrighted problems without permission. (And, even if it didn't, we'd ban it anyway - a lot of the problems in the set are fine, but there are a number of bad ones that can actually mess up your study if you use them!)