More amusing or more likely to make you laugh than something else.
From 'funny,' which originated around 1700s from 'fun' (which came from Middle English 'fonnen,' meaning 'to befuddle'). The comparative form adds '-er' to compare two funny things.
What's funny varies wildly across cultures and time periods—medieval people found slapstick hilarious, yet modern comedians use subtle wordplay. The fact that 'funny' is so relative is itself kind of funny!
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