Although people with high incomes appear to be happier than those with low incomes, people in the United States in general have become less happy over the last 30 years even though real GDP has risen. What are some of the reasons why the increase in real GDP does not always imply greater happiness? Begin with an explanation of GDP.

Real GDP is not the direct indication of happiness, because happiness is dependent on a number of other factors, which when combined can result in a happy life.

Explanation:

Real GDP is defined as the measure of the value of the output of the economy, in the macroeconomics, which reflects the money value of all goods and services produced in a given year. Here the output of the economy is also adjusted for the changes in prices occurring in the year.

According the referred application 3 of the book, it is true that the people of United States have become less happy despite the real GDP rise over the last 30 years. This is because the growth of real GDP is not able to cope up simultaneously with the increased workplace stress, jeopardized married life, traffic congestion, health problems and deterioration of environment.

In conclusion, it can be stated that Money does play an important role in increasing the happiness. However the factor alone is not able to cope up with all the problems and this is true only when all the other factors such as a conducive working environment, happy married life, healthy life are also accompanying more money.

The rise in GDP inflicts a rise in Taxes.

Explanation:

The total value of goods produced and services provided in country during one year it can also be defined as the sum of the market values, or prices, of all final goods and services produced within an economy during a period of time. GDP involves government spending and trading in an economy for instance when American GDP increases that means the government could be spending more as GDP involves private consumption plus gross investment plus government investment plus government spending plus exports minus imports, so if the American government decides to spend money recklessly this can be effective to everyone the rich and the poor.

Increase in GDP can mean that government spends more which the money it spends or invested or saved is collected through taxes so everyone is affected by this action as not everyone is happy because the rich are taxed huge chunks of money and a portion of the poor earn a portion of that tax through government subsidies and support checks.

The relationship between tax and GDP

The higher the GDP the a country e.g. America collects taxes from the nation so taxes definitely increase a lot during the 30 year period where people become unhappy about this even though they have a lot of money to spend than before but the inflation and taxes decrease the value of money and increase the quantity of money in the economy which in turn causes people to be unhappy.  

So countries that collect less taxes have lower GDPs.

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