When the default policy for the iptables INPUT chain is set to DROP, why should a rule allowing traffic to localhost exist?

When the default policy for the iptables INPUT chain is set to DROP, why should a rule allowing traffic to localhost exist?

A.
All traffic to localhost must always be allowed.

B.
It doesn’t matter; iptables never affects packets addressed to localhost

C.
Sendmail delivers emails to localhost

D.
Some applications use the localhost interface to communicate with other applications.

E.
syslogd receives messages on localhost