Which command Deletes and Frees Space
Microsoft exams (and preparation material) tends to be stupid in some cases. It works best with excluding answers. You have to keep records? So truncate is not an option for you (and creating a new table is typically not the right way to solve it).

Delete does free up the space. Of course not the harddisk space but (again typically) the space inside the clustered index. The background that the ghost cleanup process has to really tidy up is too complex for 98-364. This exam is about database fundamentals.