Employment and Prices in a Simple Macro-economy

This exercise sets up inter-linked labor and goods markets in a classroom macroeconomy. Students with worker roles are endowed with labor that can be consumed or sold to firms, who post wages, purchase labor, and produce goods that can either be consumed or sold to workers. The money from sales is used by firms to purchase labor in the next period. Complicated record keeping is avoided by using ordinary playing cards to represent money and goods. The exercise can stimulate a discussion on potential output, unemployment, and the role of money in determining wages and prices.