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The verb phrase links the small dog subject to with the other excited dogs modifier to form the complete sentence, The small dog was playing with the other excited dogs.
Yet his political activity was not inconsiderable, and his advice was always sound and well-considered; while in his government of the Netherlands, which he exercised through the marquis de Prie, he set himself resolutely to oppose the many wild schemes, such as Law's Mississippi project, in which the times were so fertile.
Can a phrase contain a verb? Survey the following constructions:• Subjects, Verbs, and Objects.