In every community, there are three main types of cash flow: Good money, Bad money, and Neutral money. Each of them has a different effect on the local economy.
Good money is generated outside of the community and spent inside the community--this increases the wealth of the town. A great example of this in Macon County, TN is the Folk Medicine Festival. This event is marketed all over the Southeast region and at several travel shows. It draws thousands of travelers to Red Boiling Springs, TN--the visitors book the local hotels, fuel up at the gas stations, and enjoy our local eateries. Not only do the local business have an economic boost but so do their suppliers. Furthermore, the increased sales activity also generates more tax revenue for the City.
The next cash flow type, Bad money, should be avoided as much as possible. Because it is a thief that causes the depletion of community wealth. Bad money is made locally but spent out of town. For example, when one shops at the Lowe's in Gallatin, TN versus using a local home improvement center--this has a negative impact on the local economy. Maybe you found it cheaper--but is it really the best value? When you shop out of town, the local merchant is not generating a tax base for the community. Furthermore, shopping locally saves you time and gas money--therefore, you may find that you can purchase the item locally at the same cost.
Lastly, there is the Neutral cash flow--it has been said that every dollar circulates in a community seven times. What does that mean? Here's a good example: Justice Trucking gets paid from a local lumber company for hauling wood. JT pays its owners--they take that money to buy groceries at Mike's Value Plus, fuel their vehicles at Marathon, and eat supper at Lone Star BBQ. Then Mike's pays his employees and their employees do the same as JT. The others follow suit--do you see the pattern? This is a circulation of wealth but it does not increase or decrease the wealth of a community.