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Question:

In each of the questions given below, four different ways of writing a sentence are indicated. Choose the best way of writing the sentence.

Any action of government to reduce the systemic risk inherent in financial markets will also reduce the risks that private operators perceive and thereby encourage excessive hedging.
Any action by government to reduce the systemic risk inherent in financial markets will also reduce the risks that private operators perceive and thereby encourage excessive gambling.
Any action by government to reduce the systemic risk inherent due to financial markets will also reduce that risks that private operators perceive and thereby encourages excessive hedging.
Any action of government to reduce the systemic risk inherent to financial markets will also reduce the risks that private operators perceive and thereby encourage excessive gambling.

Explanation:

The action is by the government and not of the government. That helps us to rule out sentences A and D. Also, ‘hedging’ is not correct in sentence A. Hedge is ‘a means of protection or defense, especially against financial losses.
‘Gambling’ is more appropriate (reduce risk and encourage gambling) in the context of the sentence. Sentence C has a verbose segment –‘reduce that risk that private …’ It should be ‘reduce the/those risks…’ B is the most appropriate.
Hence, the correct answer is option 2.

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