It’s general supply and demand. Employers set wages where they’re willing to pay employees that wage and employees agree to a wage that they’re willing to work for. Based on that value, employers determine what their prices are based on how much profit they want to make. Ultimately that determines how much money items cost when people want to buy them. Of course businesses are competing against each other, so theoretically, the business offering the best product at the lowest price will get the most customers, and the best employees will work for the company offering them the most money (theoretically)
There are lots of other factors, including how much labor supply there is (population) and demand for goods, how the government is using tax revenue, how much scientific innovation is being done to optimize production, cultural behaviors, and much more.
The actual value of a currency is supposed to reach an equilibrium based on all of those factors
Inflation happens naturally, even if governments don’t print a lot of money. But printing money can cause more inflation. Printing money can be good sometimes, too. Raising taxes can also be good.
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