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They use a powerful electromagnet. An electromagnet is essentially a coil of wire. When an electric current is passed through the wire, a magnetic force is created inside the coil. So to make a magnet, they rap the raw materials (special combinations of metal) in a wire and pass a current in the wire for a certain time. When the current is shut off, the material inside retains the magnetic properties and becomes what we call a Magnet.

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Q: What type of magnet is used to create other magnets?
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