I bought a new MacBook Air. How do I transfer everything from the current MacBook Air to the new one? Should I use iCloud?

Apple provides instructions on how to set up your new Mac by copying the data to your new Mac using a Time Machine Backup.

See

Back up your Mac with Time Machine

Set up your MacBook Air

This is by far the easiest way to set up your new Mac. The second linked document takes you through the steps with Setup Assistant to use Time Machine to "restore" your old Mac's system onto your new Mac.

The Transfer information dot point is where you deploy your Time Machine backup.

Regarding your question about iCloud, after your system has started up and you sign into iCloud with your Apple ID all the iCloud data will begin to download as your new Mac synchronises with iCloud.

If you do not have a Time Machine backup disc now is the time to invest a small amount of money in getting an external drive to set up your new Mac and thereafter to continue backing up your computer.