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Most cities in the United States where planned out, rather than just developed over time. As a result their streets are usually laid out on a grid plan. A block refers to the area that is enclosed by a street on all 4 sides, basically each area of the grid that has been dissected by streets running perpendicular to each other.

Another way to look at a block is as the area you are in once you cross at an intersection and are on the sidewalk before you reach the next intersection.

As such, when Americans refer to something as being x, in this case 40, blocks away they mean that to reach this location, one must pass x, 40, of these areas that are enclosed by streets.

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