A person sitting firmly over a rotating stool has his arms stretched. If he folds his arms, his angular momentum about the axis of rotation

Moment of inertia

So, when the guy folds his arms, I_body remains the same; but I_hand changes due to decrease in R_j. So the moment of inertia of the whole body decreases.

As per the question the guy is sitting on a rotating stool, ω is taken to be unchanged. This means

Hence angular momentum L decreases.