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GMAT Tip: Three Rules of Percents

GMAT Tip: Three Rules of Percents

Photograph by Duncan Smith/Getty Images

The GMAT Tip of the Week is a weekly column that includes advice on taking the Graduate Management Admission Test, which is required for admission to most business schools. Every week an instructor from a top test-prep company will share suggestions for improving your GMAT score. This week’s tip comes from Mike McGarry, lead GMAT content creator at Magoosh.

The business world is full of percents. In fact, you would be hard-pressed to find a day when Bloomberg Businessweek doesn’t mention at least one percent in its articles. Not surprisingly, the GMAT loves, as a result, to test your knowledge of percents. If percents are not your thing, here are a few tips that will help you:

1. Every percent can be expressed as a decimal. Simply move the decimal place two places to the left, and you get 37 percent = 0.37 as a decimal. That, in and of itself, is not earth-shattering.

2. You must understand the three kinds of multipliers. If you are taking a percent of a number, the decimal form of the percent is the multiplier: 37 percent of k is 0.37 x k. If you are increasing a number by a percent, you add 1 plus the decimal to get a multiplier: Thus, if x increases 37 percent, the multiplier is 1.37. If a number decreases by a certain percent, you subtract the decimal from 1 to create the multiplier. The multiplier for a 37 percent decrease would be 1 – 0.37 = 0.63, and after k decreases by 37 percent, the result would be 0.63 x k. Multipliers vastly simplify algebraic work with percents, especially percent increases and percent decreases.

3. Multipliers are the key to understanding percent increase and decrease. While I’m on the subject of percent increases and percent decreases, let’s dispel a myth that appears time and time again as a wrong answer choice on GMAT Quantitative questions. If you increase by a percent, then decrease by that same percent, you do not wind up back where you started. For example, start with $100, increase by 50 percent to $150; then decrease by 50 percent. Half of $150 is $75, so you wind up with a final value of $75, not a final value of $100. Always use multipliers when calculating percent increase or percent decrease. Increase a number by 20 percent, then decrease by 30 percent—that’s not a 10 percent decrease. Instead, k x 1.20 x 0.70 = k x 0.84, which in fact is a 16 percent decrease.

In general, if a problem has a percent increase and also a percent decrease, it will never be correct simply to add or subtract those percents directly. That will always be a tempting approach, which you must avoid.

Mike McGarry scored in the 99th percentile on the GMAT. He is an expert in standardized test preparation and has been a teacher for more than 20 years. McGarry earned both a bachelor’s degree in physics and a master’s in comparative religion from Harvard University.

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