Step 1: Understanding the Sentence
This quote (from Nelson Mandela) defines true freedom. It uses a "not... but..." structure to contrast a simple definition with a more profound one. The first blank needs an adverb meaning "just" or "simply". The second blank needs a relative pronoun to introduce a clause describing the "way" of living.
Step 2: Evaluating the Options
First Blank: The adverbs "Merely" and "Only" both mean "just" or "simply" and fit the context well. "Exactly" does not fit the "not... but..." contrast.
Second Blank: The second part is "...to live in a way ________ respects and enhances...". The blank needs a relative pronoun to refer to "a way". The correct relative pronoun to refer to a thing or concept is "that" or "which". "This" and "then" are not relative pronouns. "Their" is a possessive pronoun. So, "that" is the correct choice.
Let's check the pairs:
(A) Only, this: "This" is incorrect.
(B) Only, then: "Then" is incorrect.
(C) Merely, that: "Merely" fits the first blank perfectly. "That" fits the second blank perfectly. This is the correct option.
(D) Exactly, their: Both are incorrect.
Step 3: Final Answer
The adverb "Merely" and the relative pronoun "that" complete the sentence meaningfully and grammatically. Therefore, option (C) is the correct answer.