We can reduce eddy currents in the core of transformer by:

The correct option is taking laminated core.

Understanding Eddy Currents:
When an alternating current flows through the primary coil of a transformer, it generates a continuously changing magnetic flux in the iron core. According to Faraday's law of electromagnetic induction, this changing magnetic flux induces circulating currents in the volume of the metallic core itself. These circulating currents are called eddy currents. Because the iron core has electrical resistance, these currents lead to energy loss in the form of heat, given by Joule's heating law:

$$P=\frac{V^2}{R}$$

Here, $P$ represents the power loss as heat, $V$ is the induced electromotive force (emf), and $R$ is the resistance of the electrical path within the core.

Why a Laminated Core Reduces Eddy Currents:
To minimize these losses, the core is not made of a single solid block of iron. Instead, it is constructed from thin sheets of iron called laminations. Each sheet is coated with a thin insulating layer of varnish or oxide. The laminations are stacked together parallel to the direction of the magnetic field.
Since the insulation prevents the flow of current from one sheet to another, the eddy currents are restricted to flow only within the very narrow thickness of each individual lamination sheet. This greatly restricts the size of the circulating loops, effectively increasing the electrical resistance $R$ of the path. According to the power formula, as resistance increases, the magnitude of the eddy currents and the associated power loss as heat are significantly reduced.