The working of multiplier can be explained as follows:
We are given that the value of MPC =0.8 and also that initial increase in investment is ₹800 crore. This implies that with every increase of ₹1 in the income, people consume 0.8 part of the increased income i.e, ., people consume ₹0.80and Save ₹ 0.20.
The table shows that initial increase in investment of ₹800 will lead to a change in income by ₹800 in the first round. As MPC is 0.8 , so people will consume 0.8 of the increased income (i.e. ₹640 ), thereby saving ₹160. This will be termed as leakage (as it is not ploughed back into the economy).
In the next round, due to the increase in the consumption expenditure by ₹640, there will be an increase in income ₹640. The people will again spend the increased income i.e. ₹512 and save the rest part of the income ₹128.
In the third round, similarly the increased consumption expenditure of ₹512 will cause a change in the income by ₹512. They will spend a part of this income on consumption i.e., ₹409.6 and will save the rest of the increased income ₹102.4.
This process will continue and the income will go on increasing as a result of increase in consumption. The total change (∆Y)=₹4000 (approx) and the change in the investment (∆I) will be 800 .
k‌=‌

1

1−MPC

‌=‌

∆Y

∆I

k‌=‌

1

1−0.8

=‌

∆Y

800

or, ‌

1

0.2

=‌

∆Y

800

So, ∆Y=4,000
Thus, we can observe that an initial increase in the investment by ₹800 crore results in increase of income and output by ₹ 4000 crore.