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The AC multiple. When you equip an AC item, your character’s armor class jumps up at a ratio of (approximately) 1.6 to one. If a bracer has an AC of 10, your warrior’s AC will not increase by 10 pts when you equip it. Your characters AC will go up by about 16 points.
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AFAIK, from experience, AC is working at intended (damage mitigation) but level has more to do with it than anything.