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What is happening here is that gas is escaping from the soda bottle and moving up into the balloon. As the gas enters the balloon, the balloon will, of course, expand.
As you know, soda is carbonated. That means that it has carbon dioxide mixed into it. That's what makes the bubbles. You also know that if you leave soda out it gets flat (it stops being bubbly). This is because the gas has leaked out. It goes out faster if you shake it (as you know if you've ever shaken a bottle of soda and then opened it.
So in your experiment that you are describing, you are trapping the gas that escapes from the soda in the balloon. This makes the balloon expand.
Go down to "Soda Balloon Pump" in the link to see more.
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