We are given the differential equation:
\[
(1 + y) \frac{dy}{dx} = y.
\]
Step 1: Rearrange the equation
Rearrange the equation as:
\[
\frac{dy}{dx} = \frac{y}{1 + y}.
\]
Step 2: Separate variables
Separate the variables:
\[
\frac{1 + y}{y} \, dy = dx.
\]
This simplifies to:
\[
\left( 1 + \frac{1}{y} \right) dy = dx.
\]
Step 3: Integrate both sides
Now, integrate both sides:
\[
\int \left( 1 + \frac{1}{y} \right) dy = \int dx.
\]
On integrating:
\[
y + \ln |y| = x + C,
\]
where \( C \) is the constant of integration.
Step 4: Apply the initial condition
We are given the initial condition \( y(1) = 1 \). Substituting this into the equation:
\[
1 + \ln 1 = 1 + C $\Rightarrow$ 1 + 0 = 1 + C $\Rightarrow$ C = 0.
\]
Thus, the solution is:
\[
y + \ln |y| = x.
\]
Exponentiate both sides:
\[
y e^y = e^x.
\]
Thus, the solution is \( y e^y = e^x \), corresponding to Option (C).
Final Answer: (C) \( y e^y = e^x \)