Meaning of 'If you're happy and you know it, clap your hands'

[Daemon99]

There is a song whose lyrics go something like: If you're happy and you know it, clap your hands.

Does 'it' here refer to the fact that you are happy? How could somebody be happy and not know it?
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Non-native speaker of English
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I intend to live forever - so far, so good.

[Kitosdad]

Does 'it' here refer to the fact that you are happy? Yes it does.

Your other supposition is also correct.

One could be sad, and also feel IT. LOL.
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Keep it simple ... Keep it interesting.

[Gray]

As it is a lyrics, we should not take it as it is. It might be the case that the poet meant to say -- we all are happy but we deny that. And therefore he/she urges us to look inside to find/know the happiness.

See if you could connect to the meaning :)
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First lesson - English, not english. I, not i. ~A student of English

[Kitosdad]

Wow, you are going " deep " now Gray. But a thoughtful post.
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Keep it simple ... Keep it interesting.