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There is also this notice on the Help pages:
"Important: Deleting a collection does not delete any of the content stored on your device or in Your Kindle Library. After a collection is deleted, the items that were in it appear on the Home screen if you sort items by Collections."
Content "in" a collection isn't like files on a computer that are in a folder. Collections are just tags, not locations, which is why a book can be in more than one collection but isn't duplicated.
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