When Alex read the names of the categories, after reading "Where's that Church," he said "You have to give us the present country".
An article I read noted "Palestine is not officially recognized as a state by the United Nations, Israel, the United States, the United Kingdom, Switzerland, Canada, Japan, South Korea, Mexico, Australia, New Zealand, and most of the European Union."
I don't know the rules of Jeopardy, but, on some other game shows, when asking for a country, they'll indicate they mean they're looking for 'a sovereign state that is a member of the UN in its own right'. Palestine would not qualify under that rule, placing Bethlehem in Israel instead.