The article examines how wages and employment are determined through bargaining between producers and unions in a macroeconomic model. Efficient bargaining leads to no loss in production efficiency, but temporary equilibria may not always be efficient due to market feedback and demand effects. The dynamics of money balances, prices, and wages are influenced by government deficits and consumer expectations. Under perfect foresight, the economy behaves similarly to one with competitive wage and price setting, with two balanced paths, one stable and one unstable, depending on government demand levels.