WW1 was caused by many things. To simplify the answer, lets go through each option.
Remember, we are looking for something that was not a cause.
a. International Competition, which produced increases in armies and competition for colonies
: This did happen, countries were competing to see who was the most powerful in strength. Therefore, this option is incorrect.
b. Diplomatic shifts set off by the unification of Germany in 1870
: This is true, and it caused France and Russia to work together for a while.
c. Economic instability and shrinking national production across Europe
: This is the only option that is possible. The economies of most European nations were growing, not shrinking.
d. Increase in nationalist feeling, especially in the Balkan region: This did happen, and this is a reason that Arch Duke Ferdinand was assassinated.
The answer is C.
I hope this helps! :)
