Does cash flow determine prices or is it the other way round? The two key flows in the economy are the flow of goods and services from sellers to buyers, and the flow of cash in the opposite direction. Central banks target inflation, the average price of goods and services. However, every decade or so the idea is put forward that they should instead focus on the flow of cash – nominal GDP. Stable nominal GDP growth is good. When spending falls, so does the amount of money available to pay workers, leading to unemployment, wage cuts and further falls in spending. Lower growth in the cash size of the economy has a ... (full story)