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Sentence Correction: Pronoun Questions - It

John has a dog. It barks strangely.

In the above sentence, it functions as a __________.

Correct! It refers to the previously mentioned noun dog.

Incorrect. It barks strangely in itself is a misunderstood sentence, as it obviously derives its meaning from something else.

Impossible. It either refers to a previously mentioned noun, in which case it functions as a pronoun, or it refers to nothing, in which case it functions as a subject replacement.

pronoun
subject replacement
both a pronoun and a subject replacement