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The caster level is the amount of levels you have in a specific class. For example, an 8/5/9 sorcerer/cleric/paladin would have a caster level of 8 when casting arcane spells, a caster level of 5 when casting cleric spells and one of 9 with his paladin spells. The spell level is the level of the spell itself (ranging from 0-9, and using metamagic like Empower Spell does not increase this).
Caster level typically affects spell duration and the extent of the spell's bonus/bonus damage. Spell level and the casting ability score influence the saving throw the enemy needs to resist.
The palemaster continues to gain arcane spell slots (castings/day) and even unlocks new spell levels, but you do not gain bonus spells or increased caster levels.
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