B. Cooling causes air to contract and heating causes air to expand.
The graph shows that the circumference of the test balloon decreases when placed in the freezer and increases when left on the table. This indicates that cooling causes the air inside the balloon to contract, resulting in a decrease in circumference. Conversely, when the balloon is left on the table, it returns to its original size, indicating that the air inside expands when heated.
Therefore, the statement that best explains the differences seen between the two balloons during the experiment is that cooling causes air to contract and heating causes air to expand (option B).