How to know if a past participle form used in a sentence is the adjective for the next word or not?

Question

I've read this sentence in a book:

Like most languages, C# lets you define local variables, which are named elements inside a method that each hold a piece of information.

I can see this sentence in two ways, I can't get to know which one is the correct one:

named is the adjective of elements. So nothing is named "elements inside a method"! it is just saying that variables are named elements (each element has a name) which are declared inside a method and hold a piece of information.
are named is a passive verb, and the whole sentence means that variables are named "elements inside a method"

I myself think that the first one is correct, however I have to persuade someone who thinks the second one is correct. I don't know how to prove it.

Cerberus_Reinstate_Monica · Accepted Answer

In theory, the sentence is ambiguous, and both readings 1) and 2) are possible. But the context makes it completely clear that 1) is the correct one here: local variables exist inside a method, and they are elements that have names.
To avoid this ambiguity, in case reading 2) was intended, the writer could have used quotation marks around elements: which are named 'elements'... This would have been advisable. But reading 2) was never intended, so it doesn't matter here.

How to know if a past participle form used in a sentence is the adjective for the next word or not?

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