Assume that the economy is initially operating at the natural level of output. A simultaneous increase in government spending and reduction in the money supply will cause which of the following?

A. a reduction in investment in the medium run
B. a reduction in output and a reduction in the nominal wage in the short run
C. an increase in output and an increase in the aggregate price level in the short run
D. an increase in the aggregate price level, no change in output and in the interest rate in the medium run.
E. a reduction in the interest rate in the medium run