The parent function is
After a transformation the function g(x) was determined:
The function f(x) was multiplied by a constant k=1/7 to determine the function g(x), you can express the transformation as follows:
The fact that the function was multiplied by a constant, indicates that the transformation is a vertical dilation. To know if its a vertical stretch or a vertical compression you have to look at the magnitude of the constant:
If |k|>1, then the transformation is a vertical stretch.
If 0<|k|<1, then the transformation is a vertical compression.
For the given transformation, the constant is greater than zero but less than one, which indicates that the transformation applied was a vertical compression, the factor of the compression is given by the denominator of the fraction, which is 7.
The correct option is C.