Cut the meat into 1/2 inch cubes. Heat up 1 1/2 Tablespoons of oil in a skillet over high heat. When the skillet is very hot, add the beef in a single layer. You will need to do this in batches. Brown all over. This will give tremendous flavor to the goulash.
Add onions to the meat, season with salt, cover and cook on medium heat until softened.
Add carrots, season with salt and pepper, then cover and cook on medium heat until softened.
Add tomato paste, garlic, paprika and chili powder. Cook for about a minute and then add the flour. Stir until completely incorporated into the meat and vegetables.
Add water or broth a little bit at a time, scraping the botom of the skillet and stirring so that there are no lumps. Add the rest of the liquid and bay leaf.
Cover and cook on low heat for about 1 1/2 hours, until meat is fork-tender. Season with salt and pepper, if needed.