This is a TERRIBLE question, quite possibly the worst I have ever seen, and that is saying something. The correct answer is none of the above.

There are three problems with the question as posed. First is that it says that the airplane is required to maintain a constant altitude, but it does not say that it actually does. Second, it doesn't tell you what the initial conditions are. Are you initially in level flight? Coming out of a spin? In an updraft? Third, the answers are in the form of conditionals, and the conditions in the first three answers are counterfactuals.

Let's assume, since the question says that the airplane is "required to maintain a constant altitude" that it is initially in level flight. Now, as specified, you reduce power. By the book, two things must happen to maintain altitude: the angle of attack must increase, and the airspeed must decrease. But is this actually true in reality? No! Lots of other things could be going on. You could be behind the power curve. You could have hit an updraft. You could be recovering from a spin (that would make reducing power make sense) or engaged in some other aerobatic maneuver. You could have gotten caught in an alien tractor beam. The question doesn't say, so you have to start making assumptions. A reasonable set of assumptions is that initially you are in level, steady-state flight, ahead of the power curve, and no updrafts or alien tractor beams. So if you reduce power, to maintain altitude you have to increase the angle of attack, which will slow you down.

The problem with answer C is that it has a conditional: "If speed is increased." But we already know (under our reasonable assumptions) that speed will decrease. So either this answer is a counterfactual, or we have to start making different assumptions. But the question provides no guidance about what kinds of assumptions we are allowed to make. It really is equivalent to, "an increase in angle of attack must be made if you are caught in an alien tractor beam." The first part is correct -- the angle of attack must increase. But the condition makes the answer non-sensical (under reasonable assumptions) and therefore not correct.

Answers A and B are likewise counterfactuals. Speed will not increase, and angle of attack cannot be reduced under the specified conditions. Answer D is not a counterfactual because the condition, "If power is reduced" is already specified in the question, so this is equivalent to simply saying, "Maximum flap should be used to increase the lift." This is actually a not-entirely-indefensible answer. Adding flaps actually will help you maintain altitude, but only for a very short time before the extra drag slows you down to the point where you stall. So "should" you do this? Probably not.

Whoever wrote this question, and whoever signed off on including it in whatever test you are taking, should be fired.