In this example the value of the multiplier is 2.5. Consider the following example. Firm A reacts to the higher demand for its product by running down its current inventories and increasing production. If some of the higher demand is met from current inventories, production in the following period increases to make up for the inventory depletion. This in turn increases demand for all these goods and services.
Exports depend on income of foreigners but imports depend on domestic income.
Like the demand for domestic goods, as income increases, demand for imported goods increases. The intuition is that a fraction of the income is spent on imported goods. This reduces the amount by which demand for domestic goods increases. Notice that if an increase in government spending implies an increase in the government's budget deficit and imports depend on income, the resulting increase in imports decreases net exports. This will increase any existing trade deficit or reduce any existing trade surplus.