The major key is to recognize that the first statement is a statement of
necessity: “there can be no growth without investment” means that if capacity is full, growth
needs, or
requires, investment. That is, under full capacity, investment is necessary to bring about growth, although there may be other factors that are needed as well. Now we can integrate the second sentence: Reducing interest rates produces investment, the very thing we just saw is
necessary for growth. Bottom line: Reducing rates won’t guarantee growth, but it will lead to one necessary factor for growth—investment. In other words, as answer choice (B) has it, a reduction in rates allows for a condition necessary for growth to come about.
(A) contradicts the stimulus. Any reduction in interest rates produces new capital investment—no exceptions.
(C) is an out-of-place policy recommendation. The argument never discusses what should be done with interest rates or anything else.
(D) There are no restrictions on the source of new capital investment. The stimulus deals only with falling rates; since we’re told nothing of rising rates, it’s totally possible that new capital investment that takes place while interest rates are rising could lead to industrial growth.
(E) This answer choice scrambles the terms of the argument. The argument never mentions “manufacturing capacity newly created” and there is no requirement that it be “fully utilized.”
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