Final answer:
Edna's purchase and resale of an old bookcase for $500 after refurbishing it does not contribute to GDP because it is considered a sale of used goods, which do not count towards the GDP in the current year.
Step-by-step explanation:
The transaction where Edna buys an old bookcase for $200 and sells it after fixing it up for $500 does not contribute to Gross Domestic Product (GDP) because it involves the sale of used goods.
The sales of used goods are not included in GDP calculations because they do not represent the production of new goods or services within the current year; they were part of the GDP in the year they were initially produced. Additionally, when calculating GDP by the components of demand, only new goods and services are considered for accurate economic analysis.
When Edna buys an old bookcase for $200 and sells it in her antique shop for $500, both of these transactions contribute to GDP. The purchase of the bookcase is considered consumption spending, which is a component of GDP. The sale of the bookcase in Edna's antique shop is considered business investment, also a component of GDP.
Therefore, the contribution to GDP for this transaction is $200 for the purchase of the bookcase and $500 for the sale, totaling $700.
Therefore, the contribution to GDP for the given transaction is zero (0).