Step 1: Identify the reagents.
The reagents used are
\[
N_2H_2,\ NaOH,\ \text{ethylene glycol},\ \Delta
\]
These are the conditions of the Wolff--Kishner reduction.
Wolff--Kishner reduction converts a carbonyl group
\[
(\gt C=O)
\]
into a methylene group
\[
(-CH_2-)
\]
without affecting the nitro group under these conditions.
Step 2: Examine the substrate.
The given compound contains:
\[
-OH
\]
\[
-NO_2
\]
and
\[
-COCH_3
\]
groups attached to the benzene ring.
The carbonyl-containing side chain is an acetyl group:
\[
-COCH_3
\]
Step 3: Apply Wolff--Kishner reduction.
The acetyl group undergoes reduction:
\[
Ar-COCH_3
\rightarrow
Ar-CH_2CH_3
\]
Thus,
\[
-COCH_3
\]
is converted into
\[
-CH_2CH_3
\]
The phenolic \(-OH\) group and nitro \(-NO_2\) group remain unchanged.
Step 4: Identify the product.
The resulting compound is
4-Ethyl-2-nitrophenol
which corresponds to the first structure shown in the options.
Step 5: Final conclusion.
Therefore, the major product formed is
\[
\boxed{\text{4-Ethyl-2-nitrophenol}}
\]
Hence, the correct option is
\[
\boxed{(1)}
\]