Statement I — "For negative feedback systems, the open loop gain decreases by a certain factor." TRUE as intended. Feeding a fraction β of the output back in opposition to the input gives the closed-loop gain

\(A_f=\dfrac{A}{1+A\beta}\)

so the available gain is reduced by exactly the factor \((1+A\beta)\), called the amount of feedback or the return difference. (Strictly, it is the closed-loop gain that falls; the device's own open-loop gain A is unchanged. The statement is testing the standard textbook fact that negative feedback trades gain away by the factor 1 + Aβ, and the key marks it correct.)

Statement II — "Negative feedback systems are better in terms of system stability." TRUE. The same factor 1 + Aβ that costs gain buys a list of improvements:

Gain stability: differentiating the closed-loop expression gives

\(\dfrac{dA_f}{A_f}=\dfrac{1}{1+A\beta}\cdot\dfrac{dA}{A}\)

so a 10 % drift in the device's gain becomes a negligible drift in the closed-loop gain — the gain ends up set by the passive feedback network instead of by temperature-sensitive device parameters.

Bandwidth: multiplied by 1 + Aβ (the gain–bandwidth product stays constant).

Distortion and noise generated inside the loop: divided by 1 + Aβ.

Impedances: raised or lowered by the same factor depending on the topology, which makes input and output behaviour predictable.

Both statements are therefore correct, and the second explains why the loss of gain in the first is a bargain: raw gain is cheap to add with another stage, whereas stability, linearity and bandwidth are not.

A caveat worth knowing: feedback improves stability only while the loop phase shift stays well short of 180°; if extra poles push the phase that far at a frequency where |Aβ| ≥ 1, the negative feedback turns positive and the amplifier oscillates — which is why op-amps are frequency-compensated.

Hence, both Statement I and Statement II are true.