This is a very interesting exercise and students love doing it. You can start your class with it or use it at any point during the class in order to shake the things up. It can be used on different levels and the number of generated words will vary depending on the learners’ previous knowledge. I prefer using it on the A1 level.
I myself could not think of more than 30 words that can be generated from these letters: D E U T S C H L A N D. My students were more imaginative than me. Here is our (combined) result:
an, na, es, alt, aus, das, des, und, neu, Hut, tun, euch, auch, acht, echt, laut, halt, Tuch, nach, Nase, Haus, Dach, Land, Lust, Dunst, Sand, Nase, Hase, Haut, Sache, Schule, Stuhl, Schade, Schande, Schund, Stand, Stunde, Tasche, Dusche, duschen, Suche, suchen, halten, lachen, lausen, tauchen, Deutsch, autsch, tausend, schalten.
You can also try the same with these letters: D E M O K R A T I E. Here is what my students came up with:
er, Ei, der, die, Tee, Rad, Tor, Tod, Rat, Arm, arm, rot, dort, Eier, Demo, Kram, Mode, Dame, Meer, Idee Markt, Karte, Tier, Tiere, Erde, Datei
Other words are also welcome.