SBI PO Mains English Sectional Mock Test 02

1. Read the following passage carefully and answer the questions given after it. Money has changed form many times, from shells and coins to paper notes and bank balances, but each change has raised the same question: who stands behind it? A central bank digital currency is the latest answer. It is a digital form of cash issued directly by the central bank, and so, unlike a balance in a commercial bank, it carries no risk that the issuer might fail. Supporters argue that such a currency could make payments cheaper and settlement faster, especially across borders, where transfers still pass through chains of correspondent banks and can take days. It could also give people without bank accounts a safe digital store of value. Because the central bank designs the system, features such as offline use or programmability can be built in from the start. The concerns are equally serious. If people could hold central bank money directly on their phones, they might move deposits out of commercial banks during a crisis, draining the very funds that banks lend to households and firms. Most designs therefore limit how much a person can hold or pay no interest on digital currency balances. Privacy is another worry: cash leaves no trace, while digital money, unless carefully designed, could allow every transaction to be watched. For a country that already has a fast and widely used retail payment system, the case for a digital currency rests less on speed and more on resilience and reach. It offers a public option that works even if private networks fail, and a base on which new services can be built. Whether people choose to use it will depend on trust, and trust is earned slowly.

   Q1.According to the passage, how does a central bank digital currency differ from a balance in a commercial bank?

   • A.It is issued by commercial banks under licence.
   • B.It always earns a higher rate of interest.
   • C.It can be used only for cross-border payments.
   • D.It cannot be stored on a phone.
   • E.It is a direct claim on the central bank, so there is no risk of the issuer failing.

2. Q2.Which of the following is NOT mentioned as a possible benefit of a digital currency?

   • A.Guaranteed higher returns for savers
   • B.Built-in features such as offline use
   • C.Cheaper and faster cross-border settlement
   • D.A safe digital store of value for the unbanked
   • E.A public payment option if private networks fail

3. Q3.Why do most designs limit holdings or pay no interest on digital currency balances?

   • A.To make cross-border transfers slower
   • B.To make the currency more attractive than cash
   • C.To increase the profits of the central bank
   • D.To prevent large outflows of deposits from commercial banks during a crisis
   • E.To protect the privacy of users

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