Step 1: Understanding the Concept
Gain of electrons is reduction, and the oxidation number falls.
Step 2: Oxidation Numbers
In \(\text{Ag}_2\text{O}\) silver is \(+1\); in \(\text{Ag}\) it is \(0\).
So silver gains one electron per atom.
Step 3: Conclusion
Silver is reduced. Hydrogen and oxygen of water remain at \(+1\) and \(-2\) in \(\text{OH}^{-}\), so water is neither oxidised nor reduced.
Final Answer:
Silver is reduced.
\[ \boxed{\text{(C) }\text{Silver is reduced.}} \]