。
She's busy preparing for the exam.
Literal
She [topic-は] exam [of-の] preparation [object-を] do [for-のに] busy.
Here のに is the nominalizer の followed by purpose-marking に — 'for the purpose of doing X.' Don't confuse it with the contrastive ~のに ('even though'). The construction [verb dictionary]+のに+忙しい ('busy with doing X') is one of the standard frames for stating what's keeping someone occupied. A noun-phrase alternative like 試験勉強で忙しい would express essentially the same meaning — Japanese routinely offers parallel noun-based and verb-based ways to package situations like this.