Final answer:
The Easterlin Paradox describes the situation where income increases do not result in proportional increases in happiness. The correct option is D.
Step-by-step explanation:
The phenomenon in question, where income levels rise but the average level of happiness in those countries does not always rise proportionally, is best described by the D. Easterlin Paradox. This paradox asserts that after a certain threshold, increases in income do not lead to greater happiness. The influential study by Diener, Tay, and Oishi discussed the relationship between rising income and the subjective well-being of nations, revealing that higher income levels do not necessarily enhance subjective well-being.
Moreover, this concept ties into discussions about economic growth and its effects on living standards and inequality. For example, even though high-income countries like the United States have seen significant economic growth, this has not necessarily translated into a proportional increase in people's happiness. This situation is similar in middle-income countries and highlights the complexity of economic policies that aim to reduce poverty or inequality without detrimentally affecting economic output and incentives for growth.
The Easterlin Paradox serves as an important reminder that monetary wealth alone cannot dictate the happiness or well-being of a nation's citizens. It suggests that policies aiming to improve standards of living must also consider other factors that contribute to happiness and fulfillment beyond economic measures.