Answer: C) Your new salary is the same as your original salary
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Explanation:
A 25% increase means that we multiply by 1.25
Think of 1.25 as 100% + 25% = 1 + 0.25 = 1.25
So the initial $40,000 salary bumps up to (40,000)*1.25 = 50,000 dollars per year.
Then we reduce this by 20%, so we'll involve the multiplier 0.80
Why this value? Because if you lose 20% of something, then you still keep the remaining 80%. Think of it as 80% + 20% = 100%, or you can say 100% - 20% = 80%
So the salary of 50,000 will drop to (50,000)*0.80 = 40,000
The salary is back to its original value. The new salary is the same as the old one.
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Extra info (optional section)
It's not a coincidence that we end up with the same number. Why is this?
If we multiply the two decimal values (1.25 and 0.8) together, we end up with 1.25*0.80 = 1
So overall, the multiplier is 1 when we increase by 25% and then decrease by 20%. The multiplier of 1 does not change the value.
This is due to the rule 1*x = x*1 = x.
This applies to any starting value you want, and there's nothing special about the 40,000 figure.
