I’m sure there are other people on this board who can answer this better, but I’ll put down what I know before they get here. I did get a undergraduate degree in Economics, but I was always an indifference student, and I’ve barely touched the stuff since I got out of school, so take this with a grain of salt. (IOW, if I screw this up badly, the prior are my excuses.)
The primary cause for normal inflation (or deflation) is wages. During times when unemployment is low, wages rise and when unemployment is high, wages fall. Prices tend to follow along, as when people have more wealth, they’ll pay more for items, and when they have less wealth, they’ll pay less. No, this doesn’t explain hyper-inflation (or deflation), which has to due with an increase in money itself (without an increase in wealth), but that’s a fairly extreme case, which is not all that relevant to the US economy. AFAIK, the steady inflation we have experienced is primarily due to rises in wages over the years.
Now, you’ll probably say that’s all well and good, but it doesn’t explain why we don’t have deflations. For instance, we’ve certainly had times in the past half century where unemployment was relatively high, why didn’t wages fall during these times, followed by falling prices, resulting in general deflation? Well, this used to happen. The Great Depression was a period of general price deflation, caused by high unemployment, and it wasn’t the only time in US history that deflation occured. In fact, prior to the 1930s, deflation was a relatively common occurance in the US. The economy tended to go through a boom or bust cycle switching back and forth between inflation and deflation every so often. I don’t have any figures on the changes in prices between 1776 and the beginning of the 20th century (or thereabouts) offhand, but IIRC, prices had not changed that much over the long run.
So, why were deflations part of American life up until the 1930s but not after it? Well, a hallmark of the labor market since then is that wages have been downwardly sticky. During times of low unemployment wages rise, but during times of high unemployment wages more or less stay the same, or rise only slightly, but they don’t fall. As for why that is, well, a lot of time has been spent investigating that. The answer seems to be that various laws, such as minimum wage laws, unemployment benefits, etc., and the effects of labor unions (collective barganing, longer term contracts) keep wages from falling during times of high unemployment. That is, of course, simplying things quite a bit.
One thing to note, however, is that there is not always a direct trade off between unemployment and inflation. Economists used to think that was the case, i.e. that when unemployment was high, inflation would be low, and that when unemployment was low, inflation would be high. That pattern follows through at times, but not always. For instance, from the end of the Great Depression until the mid-70s the theory appeared to work fairly well, but beginning in the mid-70s the US economy had a period of time when inflation was high and so was unemployment. The reason for this? Well, I don’t know how familar you are with supply and demand curves, but if you draw a little chart you’ll see that wages rising or falling in conjunction with unemployment only explains changes in the demand curve. And indeed economists used to think that only the demand curve in the labor market changed in the short run. The supply curve changed over time, of course, but slowly, and so had little effect on inflation, as by the time it changed other factors had already compensated for it. As it turns out, the supply curve can change in the short run, under the right circumstances. And that’s what happened in the 70s: a “supply shock” where the supply curve changed quickly, shifting inward, resulting in fewer people being employed for more money.
One of the interesting features of the current period of economic growth and low unemployment is that inflation has been quite low during it. This is probably due to a supply shock in the other direction, with the supply curve shifting outward. As to why the curve has (is?) shifted, it’s not at all clear, and I’m not sure anyone knows for sure.