Sun has changed their definition of what a top-levle class is. In the beginning (JLS 1st edition) there was no such thing as a nested class or inner class, and life was simple. Then they released the Inner Classes Specification, which was also called the Nested Classes Specification, and confusion ensued. (Partly because the so-called Inner Classes Specification also covered static nested classes, which is a sign that the people involved were not all in agreement about what they were doing.) On particularly poor decision they made was to introduce the term "top-level nested class" to describe a nested class that was static (and therefore similar to a "true" top-level class, in some ways, but different in others). Fortunately, someone later realized that "top-level nested" was a really stupid and confusing term, and when they wrote the JLS 2nd edition to incorporate nested classes, they changed the terminology a bit, removing the term "top-levell nested class". It's gone now. Good riddance. Unfortunately there are still some books and mock exams which still use the old term - sometimes correctly, sometimes incorrectly. In general, it's not worthwhile to worry about what the "correct" answer is to a question like this (according to the test author). In many cases, the test author is simply wrong.
In this case, using modern (post-JLS2) terminology, a top-level class cannot be declared private, or static. Ever. Anyone who tells you otherwise is using old terminology - ignore them. There is no such thing as a top-level nested class; forget you ever heard the term.
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