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The concept tested here is subjective verbs
There is a split between insist that/insist on and is/should be/to be/BE!
understanding the meaning when the verb is implying a command, verbs such as Order, mandate,insist, etc we use the subjective form, these are directive words

the format to follow is : Directive verb+ THAT + Subject + Subjective verb (IN PLURAL PRESENT)

now lets check below for this syntax
As a result of the ongoing budgetary crisis, city officials have begun to insist that all unnecessary spending is curtailed for the foreseeable future.


A) insist that all unnecessary spending is curtailed . Directive verb+ THAT + Subject + no Subjective verb (IN PLURAL PRESENT)

B) insist that all unnecessary spending should be curtailed. Directive verb+ THAT + Subject +Should over here is incorrect Subjective verb (IN PLURAL PRESENT)

C) insist on all unnecessary spending to be curtailed. Directive verb+ no THAT + Subject +to be is not Subjective verb (IN PLURAL PRESENT)

D) insist that all unnecessary spending be curtailed. Directive verb+ THAT + Subject + Subjective verb (IN PLURAL PRESENT)

E) insist on all unnecessary spending is curtailed. Directive verb+ no THAT + Subject +no Subjective verb (IN PLURAL PRESENT)

D is correct answer!!
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My answer is (D). It took me 21 seconds.

This question focuses on the subjective mood in the clause after "bossy verbs".
Reference sentence: His doctor suggested that he quarantine for 2 weeks.
Key: No "should" before the verb, but the "should" was supposed to be there but omitted. In British English, "should" is allowed.

(ABCE) does not meet expectations. More importantly, (D) perfectly meets expectation and thus is the correct answer.
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Correct Option D

- Subjective mood "city officials" - Command
- Insist that - correct idiom
- demanding verb "be" curtailed

Correct sentence structure:

As a result of the ongoing budgetary crisis, city officials have begun to insist that all unnecessary spending be curtailed for the foreseeable future.

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