Terms of trade index shows deterioration

Steps:

• Terms of trade index = (export prices / import prices) × 100, measuring purchasing power of exports for imports.
• The given index starts at 100 in 2013 and falls to 97 in 2014, then 95 in 2015.
• A declining index indicates exports buy fewer imports over time.
• Thus, terms of trade worsened from 2013 to 2015.

Why C is correct:

• Terms of trade deteriorate when the index decreases, as export prices fell relative to import prices.

Why the others are wrong:

• A: The index fell, so relative export prices decreased, not increased.
• B: The index reflects only export-import price ratio, not overall price level.
• D: No data on trade volumes provided.

Final answer: C