Depends on how you live your life and what your beliefs of money are...
Of course, statement 1 is a common one... it's great to have both, but if you had to have an option, of either: being happy (but poorer), or being unhappy (and richer).
Depends on what you consider being happy as well... what makes people happy is always a strange variable... to me, happiness consists of many good friends, regardless of monetary status, relationship status, etc.
Of course, back to the topic of money... question 1 does not assume you can't be both... they want you to look at both extremes... the rich scenario involves not having any of the friends you have now (as either you'll look down on them, or change your morals/values, or they'll change their opinion of you, or you won't have time to spend with them, etc)... you can have all the material possessions in the world, but without a loving family/friends, what use is it?

Statement 2 is another common statement, relating to number 1, saying that material possessions won't make you happy... I agree to a certain extent, because you can be entertained, or pleased by whatever you purchase with that money, or the large number in that bank account, but you lose that entertainment, enjoyment after no time at all... how many times have you gone to the store, bought something you really liked, either clothing, electronics, and then a couple weeks later aren't even wearing / using it... Money can't buy happiness... (unless you're really into prostitutes/material things)

Though, we're a society driven by those 'little green pieces of paper' (hitchhikers guide). It measures peoples worth, power, status. Why is that the measure? Maybe if we lived in a pure communist society we'd understand (or the futuristic Star Trek universe).
But... money drives people to push themselves, many times in bad / illegal ways... but in most cases, to push themselves to try harder, do better... that's the only incentive ...
I go to the gym to better myself, my health, my appearance... but that's just me, that's my incentive.. i also have incentives for money, to find a better job, to do whatever... why? So the way I live can be improved... that's my incentive there...

Money is different to everyone, no matter who you talk to. Why they want it, why they need it..  Some to buy the latest fashions, and some just to barely pay the rent. Some to buy a big screen TV, and some to buy shoes for their kids... whatever way you look at it, we're still driven by it.

Sorry, off topic, just rambled.. but in the end, all those things will make you happy.. happy to provide for your family, happy to have the latest perfume in your closet, which is why, even if people say otherwise, money does make you happy... it just depends on what your interpretation of money is.

Is it the case that the magnitude of your happiness you acquire from gaining money equals the negation of the magnitude of your uneasiness when you lose money?

Certainly not. This is too generalized a statement to be perceived a truism. Allow me to illustrate. First I'll start with the issue of the magnitude of happiness. It surely comes in myriad levels, depending on the source of happiness. 

Hypothetical scenario #1: if I had purchased 5 contracts of call options back in May 2005 for Canadian Natural Resources (CNQ:tsx) at a strike price of $35 with September expiry at a premium of $2.50, I could've exercised them in August when Hurricane Katrina struck. At that point in time, CNQ common shares were worth around $60. In essence, I would've exerted control on 500 common shares of CNQ for a mere price of $1250 (commissions are negligible), in return for a possible profit of $11250, assuming that I had the capital to first take in the shares and then sell them, via margin or otherwise. This scenario would have generated a great amount of happiness because I had the prudence and foresight to employ leverage to its maximum effect.

Hypothetical scenario #2: I flip burgers at Wendy's for $10 / hour. I still receive money, and this scenario still generates happiness when I get my paycheques, but it is of a much lower magnitude than scenario #1. Why?

Because #1 puts my money to work, instead of demanding arduous physical labour that sucks up time and energy that could've been spent on something else. While making the $11250 profit over a period of 4 months, I would still be about my business as usual, attending classes, hanging out with friends, etc. However, in #2, I would not be able to do all these things because I would be working my ass off at Wendy's at a job that is of little value to my career. Therefore, the magnitude of happiness vastly varies.

By the same logic, the magnitude of unhappiness also comes in myriad flavours.

By the way, I wrote scenario #1 partly for Bob, who often complains that stocks are too expensive for fresh grads such as ourselves, thereby avoiding investments altogether. This should clear things up a bit.

It is true that many females enjoying embarking on shopping sprees, but afterwards I often see guilt written all over their faces for their extravagance. The happiness gained from such activities is more often than not temporary.

"Oh I cannot go out to eat three times a week anymore because I've used up all my money. Now I have to cook everyday at home after returning from work."
"Now I need to work overtime for the next three months to make up for my reckless spendings. I won't have time for other stuff anymore."

There is a price to be paid for losing money in these manners.

Ugh...this is so stupid...

Just get rich already so we can tax you like crazy.  Your valuable tax dollars can get people like me through school.

So hurry up and get rich!!!!!!

Rob: Statement 2 is another common statement, relating to number 1, saying that material possessions won't make you happy... I agree to a certain extent, because you can be entertained, or pleased by whatever you purchase with that money, or the large number in that bank account, but you lose that entertainment, enjoyment after no time at all... how many times have you gone to the store, bought something you really liked, either clothing, electronics, and then a couple weeks later aren't even wearing / using it... Money can't buy happiness... (unless you're really into prostitutes/material things)

It would be misleading to conclude that money can't buy happiness. Money offers you freedom to choose. When you have money, you can either choose to buy something that is really expensive and that you really like, or you can choose not to, regardless of the duration of happiness that item would bring. If bought, it can keep you happy for a day, a month, or whenever, but you can also decide to keep the money for other uses. Lack of money does not give one that freedom; one simply cannot afford that item, whether he would like to purchase it or not. The matter has been decided for him by default.

How many times have you gone to the store, seen a really cool gadget (take the iPod Nano, for example), and said to yourself, I really want that thing, but it's got a price tag of $400. I don't think I can afford it. 

If I were rich, I can choose to live in a 1-million-dollar house on Post Road, or I can choose to live in an ordinary apartment, or even share it with someone else; I get to decide that for myself. If I were bound by money shortages, the option of living in the expensive house would simply not be available to me, whether I like the idea or not. I must settle with the cheap house/apartment because that's all I can afford. I either live here, or live on the street.

You are correct that mere "prostitutes/material things" may not necessarily generate happiness -- this happiness is often short-lived. What's at stake here is in fact much more than that: money gives you the freedom to choose what you want to do and what you don't want to do, and it is that freedom that grants long-lasting happiness.

Aren't peace of mind / sense of security factors that contribute to long-term happiness? It is hard to imagine an happy life lacking in these aspects.