Answer: The correct answer is-
As blood flows through the capillaries in the lungs, it drops off and picks up carbon dioxide and oxygen respectively.
Deoxygenated blood ( carrying carbon dioxide) reach lungs from right ventricle of heart via pulmonary artery, which decreases diameter and forms capillaries on the alveoli ( tiny air sacs in the lungs for the gaseous exchange).
Thus, oxygen is taken up by the blood ( so as to transport it to the rest of the body) whereas carbon dioxide ( which is a waste product of metabolism in the body) is dropped at lungs, which is then released out of body through exhalation.