This is the secondary rendering of [text] layers when using the [type] tool. Paragraph Text will render the content of the [text] layer based on the size you draw the [text] layer.
Paragraph Text is used if you select the [type] tool, then click+drag the [type] tool to draw the text layer, then start typing. This action will enable Paragraph Text and calculate the size of the text area based on the size you draw the [text] layer
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