A price goes up 20 percent and then down 20 percent. Most students say the price is back where it started. It is not, and the SAT builds questions around exactly that gap. Percent changes applied one after another multiply, because each change acts on the amount produced by the one before it.
Convert every percent into a multiplier before anything else. An increase of 20 percent means multiply by 1.2. A decrease of 20 percent means multiply by 0.8. A decrease of 5 percent means multiply by 0.95. Once you are working with multipliers, applying two changes in a row is just multiplying two numbers together.
Now the example. Start at 100. A 20 percent increase gives 120. A 20 percent decrease from 120 removes 24, not 20, because the second percent applies to the larger amount. The result is 96, which is 4 percent below the start. As multipliers, 1.2 times 0.8 is 0.96, which says the same thing in one step.
The overall percent change comes from the combined multiplier. Subtract 1 and read it as a percent. A combined multiplier of 0.96 means a net 4 percent decrease. A combined multiplier of 1.1025, which is 1.05 times 1.05, means a net 10.25 percent increase rather than 10 percent. The extra 0.25 percent is the second increase acting on the first increase.
Repeated changes over many periods are the same idea with an exponent. A quantity that falls 10 percent each year for 3 years is multiplied by 0.9 three times, which is 0.9 cubed, or 0.729, so 27.1 percent of it is gone. This is exactly the exponential model form, with the multiplier as the base and the number of periods as the exponent.
Order does not matter, which is a useful check. A 30 percent increase followed by a 10 percent decrease gives 1.3 times 0.9, and the reverse gives 0.9 times 1.3. Both equal 1.17. If a question offers two answers that differ based on which change came first, at most one of them can be right and usually neither describes the multiplier correctly.