Which literary term refers to a narrative that serves as an extended metaphor with characters, a setting, and other symbols innately possessing both literal and figurative meanings?

The term that describes a narrative serving as an extended metaphor, where characters, settings, and symbols possess both literal and figurative meanings, is allegory. In an allegorical work, the narrative often conveys deeper moral, social, political, or spiritual meanings beyond its surface-level story. For instance, John Bunyan's "The Pilgrim's Progress" is an allegory that illustrates the Christian journey of faith through its characters and their experiences.

In contrast, a parable is a brief story conveying a moral lesson, but it typically relies less on a complex system of symbols and does not usually explore deeper themes as broadly as an allegory. A myth often deals with ancient narratives that explain natural or social phenomena, and while it may possess figurative meanings, it usually does not function as a detailed metaphorical structure in the way allegories do. Lastly, a fable shares a moral lesson too, often with animals as characters, but it is much shorter and less complex than an allegory, focusing on a single, straightforward lesson rather than an intertwined tapestry of meanings.

Thus, allegory is the most fitting term for a narrative description that interweaves literal and figurative meanings through its characters and symbols.