Respiration is whats happening...
Oxygen comes in and carbon-dioxide comes out... maybe that can help u.. :
By hypothesis, this may be helpful:
When you say 'takes place', then you mean an action within a reaction. So better if the answer is like this:

•When you inhale and exhale, what takes place is the exchange of gases that occur mainly in the alveoli. That process ic commonly called the respiration.
When you inhale - the intercostal muscles contract, expanding the rib cage -the diaphragm contracts, pulling downwards to increase volume of the chest -pressure inside the chest is lowered and air is sucked into the lungs When you exhale - the intercostal muscles relax, ribcage drops inwards and outwards -the diaphragm relaxes, moving back upwards to decrease volume of the chest -pressure inside the chest increases and air is forced out.
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