Maleficent has answered a few of the questions but I'll go ahead and give my perspective anyway.
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what time of the year is best to go in?
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Spring is the best time to visit. Winters can get pretty harsh and a "New York summer" is sweltering. Early fall is also a great time to visit. In the spring there are always public performances, street fairs, and other events happening outdoors.
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Is it best to ride the subway and take taxis everywhere?
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The subway is the most efficient method of transportation you'll find here. Buses have extensive routes but service is slow especially in the outer boroughs (Brooklyn, Queens, the Bronx, Staten Island). Each are $2 dollars a ride or $7 dollars for a 1 day unlimited metrocard.
Taxis are quite expensive (fares cost $2.50 for the first 1/5 mi, 40¢ for each 1/5 mi thereafter, and 20¢ for each minute not in motion). Not many New Yorkers take taxis on a regular basis for this reason. I normally only take taxis while on dates or with when I travel short distances with a group.
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Where would you go to get away from the crowds?
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Well, it depends if you mean indoors or outdoors. Maleficent had a great suggestion regarding Fort Tryon Park in Washington Heights (a neighborhood in upper Manhattan--
wiki article here). I would also try Riverside Park since it is conveniently located on the Upper West Side but is not very touristy. There are many quaint cafes in the West Village where you could go for a cup of coffee to get away from the crowds. Visit the "Cage" on West 4th street where some of the best street ballers play basketball, there are always games in the afternoon.
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Besides the normal tourist stuff, what things must you see in NYC?
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I think people should visit Harlem, Washington Heights and Chinatown (not just Canal street) to get a full perspective of the city. Many people come here and only visit the parts of the city without many ethnic influences, which to me is the true vibe of this city.
In Harlem you can visit the Apollo theater, the Studio Museum (dedicated to black art), various Soul Food restaurants. Washington Heights has excellent Latin cuisine and plenty of stores to shop for cheap clothes. In the summer all the kids come out to play as well the adults. It's an all day/night event there any day of the week. Some of the most beautiful women you'll see in NYC are found in that neighborhood.
Chinatown has a ton of shopping (loads of cheap knockoffs to stay away from), cheap food, some low-key karaoke bars and a few decent lounges.
There's a great (and one of the last) video arcades located on Mott street with all the classic and new games.
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What are some of your favorite resturants?
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There are so many, it depends on which neighborhood you are in.
For Italian food I'd recommend Carmine's on 91st and Broadway. The portions are huge and they don't make reservations for any party under 6. There is usually a 45 minute - 1 hour wait on Fridays if you have a party less than 6. Don Giovani on 10th Ave. has great pizza and pasta and is smaller than Carmine's (better for two people). For the best pizza pie parlor go to John's Pizzeria on Bleeker street. For the best slice visit Bleeker Street Pizza across the street fron John's.
As for Asian, Big Wong on Mott. Street is great and cheap (about $4-5 a dish). Saigon Grill on 90th and Amsterdam has great Vietnamese food. If you want Japanese then I'd recommend any restaurant on St. Mark's Place, the street is lined with them and I've yet to visit a bad one. Do Hua is an excellent Korean restaurant located on Carmine street which has BBQ pits right on each table so you can roast your own food.
Mamoun's Fallafel on MacDougal has the best fallafels in NYC and they're only $2 bucks each. The place is a hotspot for NYU students and neighborhood residents.
There are more trendy places to eat but the aforementioned places are all about quality of food.
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If you had $50 for two people, how would you spend it in one day (and have fun & create some memories)?
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I'd start by visiting Central Park during the day and taking a walk around it. I'd then hit up a restaurant on the Upper West Side for lunch (a lot of places have a lunch special between 12-3/4pm. I'd take the train down to SoHo to visit an art gallery or possibly an indepenent film theatre. Walk to St. Mark's Place for a cheap dinner at DoJos. Head down to Chinatown and maybe over the Manhattan bridge into Brooklyn to see the sun setting on the city. From there you might be tired and want to collapse from all the walking but you could walk back to Chinatown and relax in a cafe or see an open-mic show. $50 dollars isn't much in NYC but you can definitely have a good time and not spend too much money. The key is to look online and find free or cheap events going on.
@kurty
There is a great dive bar down the block from me called the "Dive Bar." Ironic isn't it? The wings aren't that great and neither are the burgers but the beer is relatively cheap and it always has a crowd especially for happy hour.
My favorite greasy spoon diner would probably be Metro Diner on 100th street and Broadway. I've been going there for 10 years and the burgers always rock. Just watch out for the coleslaw...I've heard stories (adds authenticity if you ask me).
As mentioned before, some of the best cheap-o sushi places are located on St. Mark's pl. Some are really cramped and the waiters hardly speak English but the food will surely please any fan of Japanese food. I have a favorite but the sign is only in Japanese so there's no way I could convey it to you guys...all the places there are good so you can't go wrong.
Any more questions feel free to ask.