In "Biographia Literaria," Samuel Taylor Coleridge differentiates between 'fancy' and 'imagination.' What does he posit is the key difference between these two terms?

1
Fancy is the ability to create, while imagination is the ability to perceive.
2
Imagination is bound by the laws of reality, while fancy is free.
3
 Fancy is passive, while imagination is an active, creative power.
4
There is no difference between the two; they are simply synonyms.

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