Answer
(a) decrease
(b) II
Work Step by Step
(a) We know that if the slab is placed in water, there is a smaller difference in the index of refraction between the slab and its surroundings which causes the light ray to undergo less deviation as it enters from the water to glass, which in turn reduces the lateral displacement.
(b) We know that the best explanation is option (II) -- that is, the displacement of the beam increases because of the increased refraction due to the water.
