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What Is the New York Dollar?

The buying power of the dollar in America's largest city is known as the New York dollar.
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  • Written By: Jacob Queen
  • Edited By: Lauren Fritsky
  • Last Modified Date: 09 July 2014
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The concept of the New York dollar is a measurement of how much a US dollar is worth in New York City. It’s generally a lot more expensive to live in New York than other cities in the nation. Everything from housing to goods cost significantly more than average. In order to compensate for this disparity, most jobs in New York also pay a significantly higher wage, which means the city has its own separate economy where everything is valued differently. The New York dollar is a way of converting the actual value of a dollar in New York to something that more people can relate to.

In the area of taxes, New York City is also significantly higher than most other areas of the country, and this is another reason that the New York dollar is valued differently. People in New York will typically pay higher property taxes, sales tax, and income tax. In general, they pay about 15% of their income in taxes while the average person in the rest of the nation would pay approximately 9%.

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Housing costs also cause the New York dollar to be valued very differently. The average New Yorker spends nearly 60% of his income on housing, while the average American would only pay about 40%. This is partly because it costs a lot more to build a house in New York, and builders have to pass this cost down to consumers. It’s also partly because space is at a premium in New York—the city has such a heavy population, so there is greater demand for housing.

When economists discuss the idea of differing values for currency, they often mention the idea of purchasing power parity (PPP). What this means is that the price of goods is adjusted in different places based on the average wage. This is generally done to make sure that the overall value of items is roughly equal for citizens in the different locations. On an international basis, there is generally a strong effort to make sure that PPP is maintained, because it allows for more equitable international trade. In the case of the New York dollar, purchasing power parity is maintained by keeping the price of goods high enough to accommodate the higher wages.

The New York dollar is sometimes used as a way to illustrate the concept of PPP in simple terms. Another similar concept is the Big Mac® index. This has been published by The Economist newspaper as an easy way to explain exchange rate theory without getting too technical. It basically outlines the idea of international PPP by analyzing the parity between the price of the Big Mac® in different countries. Some economists coined the term “burgernomics” as a way to describe the use of the Big Mac® index.

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