The diagram below shows a simplified circular flow of income for an open economy where foreign-owned multinational corporations (MNCs) have a significant presence.
If the value of profit repatriation by these foreign-owned MNCs exceeds all other cross-border primary and secondary income flows combined, what is the impact on the relationship between the country's Gross Domestic Product (GDP) and Gross National Income (GNI)?
GDP will exceed GNI because profit repatriation by foreign-owned MNCs represents a net primary income outflow from the domestic economy.
GNI will exceed GDP because profit repatriation by foreign-owned MNCs represents a net secondary income inflow to domestic households.
GDP will exceed GNI because the foreign direct investment injection directly increases GNI while leaving GDP unchanged.
GNI will exceed GDP because the investment by foreign MNCs is treated as a net capital transfer on the financial account.
