Your question: my reasoning is that if I have additional resources on hand, why would I not add them to existing tasks and probably finish them off sooner? is answer "C" crashing. Adding resources to complete a task sooner is what crashing is.
Increasing project risks due to functional or technical dependencies and other issues are increased if you Fast track a project (overlapping tasks).
The risk with resource leveling is that if you have over allocated resources the you spread out the work you are in danger of extending the project end date if any of those resources are working on tasks that are on the critical path, or you may create a new critical path after resource leveling that could extend the date of project completion.
I came across this question on the PM Simulator....
Q. You are running a public library construction project and pressure is mounting to get the building ready 10 days before the scheduled finish date. You want to shorten the project schedule without changing the project scope, and have some additional resources at your disposal. You are sure that the duration will be reduced by assigning some activities to them. In this context, which of the following schedule compression techniques is best?
A. Fast Tracking
B. Resource Leveling.
D. Resource adding.
The correct choice was C.
However, I feel that the correct choice should be 'B', my reasoning is that if I have additional resources on hand, why would I not add them to existing tasks and probably finish them off sooner? Why would I crash the activities at this stage (especially when the statement says the pressure is mounting due to the deadline)? We know Crashing can increase the project risks due to functional or technical dependencies and other issues.