Final answer:
The correct SQL statement to update a transactions table to change a flag from 'Y' to 'N' is 'UPDATE transactions SET active_flag = 'N' WHERE active_flag = 'Y'.
Step-by-step explanation:
The correct SQL statement to update a transactions table and set a flag from 'Y' to 'N' is:
c) UPDATE transactions SET active_flag = 'N' WHERE active_flag = 'Y'
This update statement specifically changes the value of the active_flag column to 'N' for all records where the current value of the active_flag is 'Y'. The other options such as MODIFY, MERGE, and REPLACE are not standard SQL commands for updating existing records in a table.