Answer
$12.5\%,\qquad $increase.
Work Step by Step
Percent change = $\displaystyle \frac{\text{new value-initial value}}{\text{initial value}}\cdot 100\%$
If the percent change is $positive$, we have an increase.
If the percent change is $negative,$ we have a decrease.
Percent change = $\displaystyle \frac{35-40}{40}\cdot 100\%$
$= \displaystyle \frac{5}{40}\cdot 100\%$
$= \displaystyle \frac{1}{8}\cdot 100\%$
$=+12.5\%,\qquad $increase.
