Translation:That is a house.
Although 그 and 저 both translate as THAT, proper usage depends on the proximity of the item (e.g. house, thing, dog) to the speaker or listener.
그 That (close to listener) 저 That (far from both speaker and listener)
If you're talking about something close to you, then it's: 이 This (close to speaker)
Duolingo is very inconsistent in their translations here. In the previous question they translate 그것은 as "that" (when it probably should be "this" if they are emphasizing the distinction between the locative particles). Here 저것은 is simply "that". So, if all three of the particles are going to be "that", why bother with this exercise? It is more of an issue with the tool than with the subject matter ... as someone states below, Korean is very context-oriented, so in conversation you'll figure it out. But in this exercise, it is the heart of the matter ... they should be consistent with "this", "that", and "that there".