SBI PO English Sectional Mock Test 05

1. Directions: Read the following passage carefully and answer the questions given below. Economists long assumed that people save as much as they intend to, adjusting their behaviour whenever their circumstances change. The evidence from retirement schemes tells a different story. When employees must actively sign up for a pension plan, a large share never do so, not because they have weighed the options and decided against saving, but because the decision keeps being postponed. When the same plan enrols workers automatically and merely allows them to opt out, participation rises dramatically, even though the choices available to each worker are exactly the same. This finding has made the 'default option' one of the most discussed tools in public policy. Its appeal lies in its apparent gentleness: no one is forced to save, and anyone who objects can leave with a single form. Supporters argue that defaults simply correct for well-documented human tendencies, such as inertia, procrastination and an exaggerated preference for the present over the future. Since some option must always be the default, they ask, why not choose the one that most people would pick if they thought carefully? Critics are less sanguine. A default that is right for the average worker may be wrong for many individuals, such as a young employee burdened with expensive debt, for whom saving at a low return while borrowing at a high one makes little sense. Moreover, the very inertia that draws people into a plan also keeps them at the default contribution rate, which is often set conservatively low. In some schemes, automatic enrolment raised the number of savers while slightly reducing the average amount each of them saved, because people who would otherwise have chosen a higher rate simply accepted the suggested one. There is also a question of trust. A default works because people interpret it, rightly or wrongly, as an implicit recommendation. If governments or employers use this influence to serve their own interests rather than those of the individuals concerned, the tool loses its legitimacy. The lesson, then, is not that defaults are good or bad in themselves, but that they are powerful, and that power exercised quietly demands at least as much scrutiny as power exercised openly.

   Q1.According to the passage, why do many employees fail to join a pension plan when they must actively sign up?

   • A.The plans offer fewer choices to those who sign up actively.
   • B.They have carefully compared the options and chosen not to save.
   • C.They cannot afford to save any part of their income.
   • D.They keep postponing the decision rather than rejecting saving after careful thought.
   • E.Their employers discourage them from joining.

2. Q2.Which of the following is the 'apparent gentleness' of the default option referred to in the second paragraph?

   • A.No one is compelled to save, and leaving the plan is easy.
   • B.It is cheaper for employers than other schemes.
   • C.It applies only to employees who request it.
   • D.It is chosen by workers through a vote.
   • E.It guarantees high returns to every worker.

3. Q3.Why, according to critics, might a default be unsuitable for a young employee with expensive debt?

   • A.The default contribution rate is always too high.
   • B.Young employees earn higher returns than older ones.
   • C.Saving at a low return while borrowing at a high cost makes little financial sense.
   • D.Young employees are not allowed to leave the plan.
   • E.Debt makes a worker ineligible for a pension.

Start the test to answer these. Correct answers and explanations are shown after you submit.