OA : The sentence correctly uses the noun clause That increased income from
advertisements was necessary to defray the losses incurred by the magazine’s decline
in readership as the subject of the verb became. None of the other constructions
is grammatically correct.

That increased income from advertisements was necessary to defray the loss- es incurred by the magazine’s decline in readership quickly became apparent to the publisher.

A. That increased income from advertisements
B. Increasing the income from advertisements
C. To increase income from advertisements
D. Increasing advertising income
E. They felt increased income from advertisements

Can someone please explain - what "that" in option A refers to.....i marked B becuase i found none other option to be correct...Please explain why A is correct and not "B".

This is not the type of that that refers to a noun before it. We are looking at a noun clause that acts as the subject of the sentence.

That increased income from advertisements was necessary to defray the losses incurred by the magazine’s decline in readership quickly became apparent to the publisher.

Here the subject of the sentence is the full that increased income from advertisements was necessary to defray the losses incurred by the magazine’s decline in readership. The sentence basically says:

X quickly became apparent to the publisher.

And what quickly became apparent to the publisher? That increased income from advertisements was necessary.
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