By default, the Make Fixed-Size Text Objects Auto-Fit While Editing option on the Workspace panel of the Tools > Options dialog is selected. This option allows the width and height of text objects to expand as you type characters. To expand only either the width or height of a text object, deselect Make Fixed-Size Text Objects Auto-Fit While Editing and then select the appropriate Expand To Fit option on the Layout palette.
See also 

To type characters into a text object