Final answer:
Refining and extending initial project requirements is known as Requirements Analysis, a critical phase ensuring the functionality and alignment with stakeholder needs and project constraints. Option 2 is correct.
Step-by-step explanation:
Once the initial set of requirements has been drawn up, refining and extending them is termed Requirements Analysis. This stage in the systems development life cycle involves taking the initial project ideas and molding them into functional specifications that are accurate, complete, and demonstrably meet the needs of the system's stakeholders.
Through Requirements Analysis, potential weaknesses in the design can be identified and corrected, and improvements can be incorporated to ensure the design meets the necessary criteria and constraints. In some cases, if the design does not meet the criteria or constraints, the process may revert to earlier steps to generate and select a new concept, iterating through the spiral design process.