...as stated in the tutorial here:

3.2 Creating the Blog Application
To begin, open a terminal, navigate to a folder where you have rights to 
create files, and type:

$ rails new blog
This will create a Rails application called Blog in a directory called 
blog.

You can see all of the switches that the Rails application builder 
accepts by running rails new -h.

After you create the blog application, switch to its folder to continue 
work directly in that application:

$ cd blog   <---*****DID YOU DO THAT???

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