English HKSI LE Paper 7 Pass Paper Question Bank (QB)

2CEXAM Mock Question
Licensing Examination Paper 7
16-Sep-19
19:47:07
1 Generally, quantity supplied and price: Topic 1
A are positively correlated. Chapter 1
B are negatively correlated. Section 1
C have no relation. QID 16
D are either positively correlated or negatively correlated. Ans A Hot
Exp The objective of the producer is to make a profit from the item. Hence, the higher the price, the more the
producer is willing to supply. The quantity supplied is therefore positively related to price.
2 Generally demand curve is: Topic 1
A upward-sloping. Chapter 1
B downward-sloping. Section 1
C flat. QID 8
D wavy. Ans B Hot
Exp Generally, the higher the price for the item, the lower the quantity demanded for it will be, and vice versa.
Quantity demanded is therefore inversely related to price. Thus, demand curve is generally shown as
negatively sloped curve.
3 Which factor most likely determines the supply of goods and services? Topic 1
A Price of goods and services Chapter 1
B Production cost Section 1
C Distribution cost QID 9
D Supply and price of substitutes Ans A Hot
Exp The objective of the producer is to make a profit from the item. Hence, the most important factor, from the
producer’s perspective, is the price that can be obtained from selling the item.
4 What's the condition for equilibrium price? Topic 1
A When supply is greater than demand. Chapter 1
B When supply is less than demand. Section 1
C When supply equals demand. QID 10
D When the quantity supplied equals the quantity demanded. Ans D Hot
Exp The price at which quantity supplied equals quantity demanded at any given time is the “equilibrium”
price for that item.
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5 Which of the following factors may affect supply and demand curve? Topic 1
I. Price of the goods and services
II. Level of income
III. Preferences and trends
IV. Supply of goods and services
A I, IV Chapter 1
B II, III Section 1
C I, II, III QID 129
D I, II, III, IV Ans D Hot
Exp Price of the goods and services affects supply and demand. Level of income and Preferences and trends
affect demand. Thus, these four options will affect supply and demand curve.
6 What will the quantity demanded and supplied change if the price of the commodity increases? Topic 1
A Quantity demanded increases and quantity supplied increases. Chapter 1
B Quantity demanded increases and quantity supplied decreases. Section 1
C Quantity demanded decreases and quantity supplied increases. QID 11
D Quantity demanded decreases and quantity supplied decreases. Ans C Hot
Exp Quantity demanded is inversely related to price. Thus, quantity demanded decreases when the price of
the commodity increases. Oppositely, the quantity supplied is positively related to price. Thus, quantity
supplied increases when the price increases.
7 Generally, quantity demanded and price: Topic 1
A are positively correlated. Chapter 1
B are negatively correlated. Section 1
C have no relation. QID 15
D are either positively correlated or negatively correlated. Ans B Hot
Exp Generally, the higher the price for the item, the lower the quantity demanded for it will be, and vice versa.
Quantity demanded is therefore inversely related to price.
8 What will the quantity demanded and supplied change if the price of the commodity decreases? Topic 1
A Quantity demanded increases and quantity supplied increases. Chapter 1
B Quantity demanded increases and quantity supplied decreases. Section 1
C Quantity demanded decreases and quantity supplied increases. QID 12
D Quantity demanded decreases and quantity supplied decreases. Ans B Hot
Exp Quantity demanded is inversely related to price. Thus, quantity demanded increases when the price of the
commodity decreases. Oppositely, the quantity supplied is positively related to price. Thus, quantity
supplied decreases when the price decreases.

9 Which factor most likely determines the demand of goods and services? Topic 1
A Price of goods and services Chapter 1
B Supply and price of substitutes Section 1
C Fiscal policy of the government QID 7
D Seasonal factors Ans A Hot
Exp The willingness of consumers to purchase an item is influenced by various factors while price is generally
the most important factor.
10 Economic sectors include: Topic 1
I. household sector
II. business sector
III. government sector
IV. overseas sector
A I, II, III Chapter 1
B I, III, IV Section 2
C II, III, IV QID 14
Exp The economic sectors are classified as:
Household sector; Business sector; Government sector; Overseas sector; Finance sector.
11 The business sector mainly functions as: Topic 1
I. fund providers
II. fund seekers
III. buyers of goods and services
IV. sellers of goods and services
A I, III Chapter 1
B I, IV Section 2
C II, III QID 18
D II, IV Ans D Hot
Exp Business sector consists of the producers of goods and services. This sector also requires funds to
produce goods and services, and the sector is therefore mainly made up of fund seekers (borrowers).
12 If a government has a budget surplus, it is more likely to be a: Topic 1
A fund provider. Chapter 1
B fund seeker. Section 2
C consumer of goods and services. QID 19
D producer of goods and services. Ans A Hot
Exp Whether a government is a fund seeker or a fund provider depends on its overall budgeting position – if in
surplus, it is a fund provider.

13 If a government has a budget deficit, it is more likely to be a: Topic 1
A fund provider. Chapter 1
B fund seeker. Section 2
C consumer of goods and services. QID 20
D producer of goods and services. Ans B Hot
Exp Whether a government is a fund seeker or a fund provider depends on its overall budgeting position – if in
deficit, it is a fund seeker.
14 If a government issues bonds, Topic 1
A it becomes a fund provider, providing funds for household and business sector. Chapter 1
B it becomes a fund seeker, raising money from household and business sector. Section 2
C it becomes a fund provider, raising money from household and business sector. QID 21
D it becomes a fund seeker, providing funds for household and business sector. Ans B Hot
Exp A government requires funds to meet its economic, political and social objectives (such as provision of
hospitals, schools and roads), and is primarily a fund seeker.
15 Which sector most likely facilitate the transfer of funds between fund providers and seekers? Topic 1
A Finance sector Chapter 1
B Business sector Section 2
C Government sector QID 22
D Overseas sector Ans A Hot
Exp Finance sector includes the financial intermediaries and institutions that facilitate the transfer of funds
between fund providers and seekers, and is therefore both provider and seeker.
16 Which of the following sector is more likely to be a fund provider? Topic 1
A Finance sector Chapter 1
B Business sector Section 2
C Government sector QID 23
D Overseas sector Ans B Hot
Exp Business sector consists of the producers of goods and services. Businesses require funds to produce
goods and services, and the sector is therefore mainly made up of fund seekers (borrowers).
17 The household sector mainly functions as: Topic 1
I. fund providers
II. fund seekers
III. buyers of goods and services
IV. sellers of goods and services
A I, III Chapter 1
B I, IV Section 2
C II, III QID 17
D II, IV Ans A Hot
Exp Household sector consists of the consumers of goods and services. It is also referred to as the retail
sector. The household sector spends and invests money, and mainly consists of fund providers (lenders).

18 Which of the following cases is in need of indirect financing/intermediation? Topic 1
A When the needs of borrowers and lenders match. Chapter 1
B When the needs of borrowers and lenders do not match. Section 3
C When borrowers want to save borrowing cost. QID 13
D When lenders want to increase lending rate. Ans B Hot
Exp The role of intermediaries is to channel the flow of funds between the borrowers and lenders. Therefore,
indirect financing, or intermediation, occurs when the needs of borrowers and lenders do not match.
19 What is the advantage of intermediation? Topic 1
A Save borrowing cost Chapter 1
B Increase interest of lenders Section 3
C Decrease interest of borrowers QID 24
D Decrease the risk of lenders Ans D Hot
Exp Intermediaries are compensated for assuming the risk involved by receiving a fee (brokerage or
commission) or by charging higher rates to borrowers than they pay to lenders.
20 What is the influence of globalization? Topic 1
I. Investors have more suitable investment opportunities.
II. Investors have opportunity to gain higher return.
III. The rapid growth of financial products
IV. Global financial markets are getting more volatile.
C III, IV QID 25
Exp Under Globalization, investment is being unrestricted by national borders. Capital-exporting countries can
earn higher return by providing services to capital-importing countries. International capital flows grew
but it’s getting instable.
21 What is the impact of globalization on correlation among global financial markets? Topic 1
A Increase correlation Chapter 1
B Decrease correlation Section 4
C No change on correlation QID 26
D Only increase the correlation of some countries Ans A Hot
Exp According to the International Monetary Fund(“IMF”),The net capital flows to emerging market economies
have demonstrated higher volatility than those to advanced economies, and a stronger correlation to
changes in global financing conditions.

22 Which of the following multilateral agency acts as the bank of central banks? Topic 1
A International Monetary Funds Chapter 1
B Bank for International Settlements Section 5
C World Bank QID 30
D World Trade Organization Ans B Hot
Exp Bank for International Settlements is perceived as a bank for central banks in the international financial
market.
23 Which of the following function does the World Bank has? Topic 1
A Act as the bank of other central banks Chapter 1
B Invest in member countries and facilitate the economic development of member countries Section 5
C sustain exchange rate stability QID 32
D Lend countries foreign exchange when needed Ans B Hot
Exp The World Bank help each developing country onto a path of stable, sustainable and equitable growth.
Option A is the function of The BIS while option C and option D are the functions of The IMF.
24 Which of the following is not included in supranational organizations or multilateral agencies? Topic 1
A People's Bank of China Chapter 1
B International Monetary Fund Section 5
C Bank for International Settlements QID 27
D World Bank Ans A Hot
Exp Supranational organizations and multilateral agencies include:

The IMF； The Bank for International Settlements (“BIS”)； The World Bank
；The Organisation for Economic Co-operation and Development (“OECD”)； The World Trade
Organization (“WTO”).
25 Which of the following are the functions of IMF? Topic 1
I. Provide a forum for cooperation on international monetary problems
II. Maintain the stability of exchange rates
III. Lend countries foreign exchange when needed
IV. Act as a settling bank of other central banks
A I, II, III, IV Chapter 1
B I, II, III Section 5
D I, III, IV Ans B Hot
Exp The main purpose of the IMF is to provide a forum for cooperation on international monetary problems; to
promote exchange rate stability; to lend countries foreign exchange when needed; and to facilitate the
growth of international trade.

26 Which of the following functions does the BIS has? Topic 1
I. Facilitate cooperation between central banks
II. Acting as a prime counterparty for central banks in their financial transactions
III. Serving as an agent or trustee in connection with international financial operations
IV. Maintain exchange rate stability
B I, II, IV Section 5
C I, III, IV QID 31
D II, III, IV Ans A Hot
Exp The BIS is an organization that promotes international cooperation among central banks and other
agencies to achieve monetary and financial stability. Maintenance of exchange rate stability is one of the
missions of IMF.
27 Which of the following is not the function of IMF? Topic 1
A Facilitate exchange rate stability Chapter 1
B Facilitate international trade Section 5
C Facilitate the economic growth of member countries QID 29
D Lend countries foreign exchange when needed Ans C Hot
Exp The main purpose of the IMF is to provide a forum for cooperation on international monetary problems; to
promote exchange rate stability; to lend countries foreign exchange when needed; and to facilitate the
growth of international trade.
28 The major goals of World Trade Organization include: Topic 1
I. to arbitrate trade disputes between countries
II. to lower trade barriers
III. to lower unemployment rate
IV. to consolidate trade quota
C I, II QID 33
D II, III, IV Ans C Hot
Exp The WTO is an international organization dealing with the global rules of trade between nations. Its main
function is to ensure that trade flows as smoothly, predictably and freely as possible.
29 The functions of Bank for International Settlements include: Topic 1
I. Promoting discussion and facilitating collaboration among central banks
II. Supporting dialogue with other authorities that are responsible for promoting financial stability
III. Acting as a prime counterparty for central banks in their financial transactions
IV. Serving as an agent or trustee in connection with international financial operations
A I, II Chapter 1
B III, IV Section 5.5
C I, III, IV QID 124
Exp The BIS fulfils this mission by:(1)promoting discussion and facilitating collaboration among central
banks;(2)supporting dialogue with other authorities that are responsible for promoting financial
stability;(3)conducting research on policy issues confronting central banks and financial supervisory
authorities;(4)acting as a prime counterparty for central banks in their financial transactions;
and(5)serving as an agent or trustee in connection with international financial operations.

30 Savings in licensed banks and time deposits belong to which type of the following money? Topic 1
I. M1
II. M2
III. M3
IV. M4
A I Chapter 1
B I, II Section 6
C II, III QID 40
Exp M2 consists of savings and time (term) deposit accounts with licensed banks while M3 consists of M2.
31 Narrow money represents: Topic 1
A M0 Chapter 1
B M1 Section 6
C M2 QID 36
D M3 Ans B Hot
Exp M1 consists of all notes and coins in circulation and customers' demand deposits placed with licensed
banks (the authorized institutions in Hong Kong under the Banking Ordinance). It is collectively known as
“narrow money”.
32 Broad money represents: Topic 1
A M0 Chapter 1
B M1 Section 6
C M2 QID 37
D M3 Ans D Hot
Exp M3 consists of M2 plus deposits in other financial institutions. It is collectively termed “broad money”.
33 The major functions of currency include: Topic 1
I. Means of storing wealth
II. a path to increase wealth
III. unit against which to value other goods and services
IV. medium of exchange
C I, II, IV QID 34
D II, III, IV Ans B Hot
Exp Money plays an important role in the financial system. Money acts as a
-means of storing wealth
- medium of exchange
-unit against which to value other goods and services.

34 Which of the following is not "narrow money" (M1)? Topic 1
I. all notes and coins in circulation
II. customers' demand deposits placed with licensed banks
III. savings in licensed banks
IV. time deposits accounts
B I, II Section 6
C III, IV QID 38
banks (the authorized institutions in Hong Kong under the Banking Ordinance).Option III and option IV are
classified as M2.
35 all notes and coins and customers' demand deposits placed with licensed banks belong to which types of Topic 1
the following money?
I. M1
II. M2
III. M3
IV. M4
A I Chapter 1
B I, II Section 6
C I, II, III QID 39
banks. Meanwhile, M2 consists of M1 and M3 consists of M2.
36 Deposits in other financial institutions belong to which type of the following money? Topic 1
I. M1
II. M2
III. M3
IV. M4
B III, IV Section 6
D III Ans D Hot
Exp M3 consists of M2 plus deposits in other financial institutions. It is collectively termed “broad money”.

37 How do banks facilitate funds circulation in financial systems? Topic 1
I. move funds
II. provide investment opportunities
III. implement fiscal policy
IV. implement monetary policy
B II, III, IV Section 6
C I, II, IV QID 43
D I, III, IV Ans C Hot
Exp Banks are financial intermediaries and they have an important role in facilitating the flow of funds in the
banking system by performing the following functions:
1.Mobilization of funds
2.Investment opportunities
3.Implementation of monetary policy
38 Money needs to be: Topic 1
I. storable
II. portable
III. durable
IV. hard to obtain
B II, III, IV Section 6
C I, III, IV QID 35
D I, II, IV Ans A Hot
Exp In order to fulfil its functions, money needs to be durable, storable and portable.
39 Money plays an important role in the financial system which includes: Topic 1
I. medium of exchange
II. unit against which to value other goods and services
III. means of storing wealth
IV. keeping constant purchasing power perpetually
B I, II, III Section 6
D I, II, IV Ans B Hot
Exp Money plays an important role in the financial system. Money acts as a
- means of storing wealth
- medium of exchange
- unit against which to value other goods and services.


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2CEXAM Mock Question

Licensing Examination Paper 7

A are positively correlated. Chapter 1

B are negatively correlated. Section 1

C have no relation. QID 16

D are either positively correlated or negatively correlated. Ans A Hot

D wavy. Ans B Hot

A Price of goods and services Chapter 1

B Production cost Section 1

C Distribution cost QID 9

D Supply and price of substitutes Ans A Hot

A When supply is greater than demand. Chapter 1

B When supply is less than demand. Section 1

C When supply equals demand. QID 10

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B II, III Section 1

C I, II, III QID 129

D I, II, III, IV Ans D Hot

A Quantity demanded increases and quantity supplied increases. Chapter 1

B Quantity demanded increases and quantity supplied decreases. Section 1

C Quantity demanded decreases and quantity supplied increases. QID 11

D Quantity demanded decreases and quantity supplied decreases. Ans C Hot

A are positively correlated. Chapter 1

B are negatively correlated. Section 1

C have no relation. QID 15

D are either positively correlated or negatively correlated. Ans B Hot

A Quantity demanded increases and quantity supplied increases. Chapter 1

B Quantity demanded increases and quantity supplied decreases. Section 1

C Quantity demanded decreases and quantity supplied increases. QID 12

D Quantity demanded decreases and quantity supplied decreases. Ans B Hot

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A Price of goods and services Chapter 1

B Supply and price of substitutes Section 1

C Fiscal policy of the government QID 7

D Seasonal factors Ans A Hot

C II, III, IV QID 14

D I, II, III, IV Ans D Hot

Exp The economic sectors are classified as:

C II, III QID 18

D II, IV Ans D Hot

A fund provider. Chapter 1

B fund seeker. Section 2

C consumer of goods and services. QID 19

D producer of goods and services. Ans A Hot

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A fund provider. Chapter 1

B fund seeker. Section 2

C consumer of goods and services. QID 20

D producer of goods and services. Ans B Hot

A Finance sector Chapter 1

B Business sector Section 2

C Government sector QID 22

D Overseas sector Ans A Hot

A Finance sector Chapter 1

B Business sector Section 2

C Government sector QID 23

D Overseas sector Ans B Hot

C II, III QID 17

D II, IV Ans A Hot

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A When the needs of borrowers and lenders match. Chapter 1

B When the needs of borrowers and lenders do not match. Section 3

C When borrowers want to save borrowing cost. QID 13

D When lenders want to increase lending rate. Ans B Hot