In a graph, we can define a domain and a range.
The domain is all the x values used in the graph.
The range is all the y values used in the graph.
These concepts can also be applied for functions:
The domain is all possible x values that can be used in the function
The range is all possible y values (the value of the function) that can be outputted in the function.
So the correct answer is the second one: the range states the values of y.