The correct answer is A) They demanded that the country goes to war with France.
Federalists responded to the XYZ Affair with France in that they demanded that the country went to war with France.
We are talking about the diplomatic incident between the United States and France, called the "XYZ Affair," that provoked the undeclared quasi-war with France in 1798.
The Frech were seizing American ships. US President John Adams sent three diplomats to negotiate with France: Charles Cotesworth, Elbridge Jerry, and John Marshall.
President Adams prepared for War and Federalist asked the United States Congress to support him, but members of Congress demanded that President Adams released the diplomatic information being negotiated. President Adams accepted but he changed the French intermediaries names by "X, Y, Z."