Choice B is the correct answer. Growth rate $r$ converts to growth factor $b = 1 + r$.

1. Identify Rate: The rate of increase is $r = 12\% = 0.12$.
2. Calculate Factor: For growth, $b = 1 + r = 1 + 0.12 = 1.12$.
3. Form Equation: Substitute into $y = ab^x$ to get $U(t) = P_0(1.12)^t$.

💡 Strategic Tip: "Increasing by $r\%$" always means multiplying by $1 + r$ (as a decimal).

Choice A is incorrect because 0.12 would mean the population shrinks to 12% of its size each month. Choice C is incorrect because 12 would mean growing by 1100% (multiplying by 12). Choice D is incorrect because 0.88 represents a decrease of 12% ($1 - 0.12$).