Wire with MCP23008 I/O expander with I2C
Everything is fine and nothing is wrong.
You are reading the GPIO register and its contents is 0x07.

The NACK at the end is not an error, it is a way to communicate between the Master and Slave.

When the Master reads data, the Master gives an ACK after each databyte from the Slave. The Master is not trying to tell the Slave that it was received, but rather it tells the Slave that another byte is going to be read.
After the last databyte, the Master send a NACK and after that a STOP.

Since only one byte is read, the Master sends a NACK and a STOP. The Master is telling the Slave that no more data is needed.

The I2C bus is only two wires. There are START, STOP, ACK and NACK conditions and the clock pulse can be stretched by a Slave. The possibilities are limited. For example when the Master wants to read 6 bytes and the Slave has only 1 byte. The Slave has no way to tell the Master that it has only 1 byte, and the Master will read those 6 bytes, valid or not.