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Musical Merry-Go-Round is a Sesame Street toy made in 1982 by CBS Toys. When the Sesame Street sign is wound, the "Playmate" tune is played, and three characters move up and down as they ride around the track.
The description in the 1984 Child Guidance/Gabriel Wonder catalog explains that the merry-go-round is "enclosed in clear plastic to protect little fingers and encourage kids to see through to a miniature amusement park world."