Terms of trade improve when export prices rise relative to import prices Steps:

• Define terms of trade (ToT) as export price index divided by import price index.
• Approximate %ΔToT as %Δ export price minus %Δ import price.
• Evaluate each option's price difference for positive change indicating ToT increase.
• Confirm supporting volume changes where both export and import volumes rise to sustain trade gains.

Why A is correct:

• Export prices fall 10% while import prices fall 15%, so %ΔToT ≈ +5%; formula shows relative export price gain, improving ToT.

Why the others are wrong:

• B: Price difference +15% suggests gain, but -15% export volume drop reduces earnings, preventing sustained ToT improvement.
• C: Price difference -1% worsens ToT despite volume shifts.
• D: Price difference -2% worsens ToT.

Final answer: A