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After creating API Gateway with two API names and integrating with lambda function,

AWS documentation recommends to deploy this API, as shown below:

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1) What does deploy API mean? How creating API gateway different from deploying API?

2) Does deploy API option internally create Cloud formation template? that creates a stack and deploy

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1.) Create API (create-rest-api from the cli) simply creates the API Gateway resource, but it does not create the method, stage, authorizer, etc. for your API Gateway. Deploy API (create-deployment from the cli) will deploy either to an already created stage, or create a new stage for deployment.

2.) No, it will not deploy a CloudFormation stack in your account.

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