Question

In what way did the illiteracy of the Anglo-Saxon period affect literature?

Answer 1

I would say that the illiteracy affected literature of the Anglo-Saxon period in a way that b) People shared stories using the spoken word.
Given that they were illiterate, and didn't know how to write, they could only spread those stories orally. 

Answer 2

The best answer to the question 'In what way did the illiteracy of the Anglo-Saxon period affect literature?' would be letter b. People shared stories using the spoken word since they do not have an established writing system that is known by many.