Thanks scoobydooby and madhur_ahuja for your responses. Your responses have confirmed the confusion in my mind.
However, I am leaning towards the subject being "Reduction".
But, I want to know the rationale behind it. For the sake of comparison, I have included one more similar sentence.
Sentence 1: The reduction in costs of data processing due to advances in processor technology has created a good opportunity for small businesses.
Sentence 2: The reduced costs of data processing due to advances in processor technology have created a good opportunity for small businesses
The intent of both sentences is the same. However, grammatically, I think Sentence 1 Subject is reduction. And Sentence 2 subject is costs.
Is there a rule in Grammar that can help us in making this distinction. One rule that comes to mind is "subject typically never resides in prepositional phrase". But I do not want to blindly follow the rule without understanding it.
Any input is welcome!
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