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The "Archived Items" is unlimited. When you see it in your device, know that It's a virtual folder only with names. The whole content you see is stored, unlimitedly and freely, in your Amazon account Cloud.
The Archived Items "folder" does not occupy any space and does not collapse with hundreds or thousands of items there. It's Amazon's courtesy for never losing what you have purchased from Kindle Store (and, recently, some space of personal documents too).
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