It modifies "air".
Student or Learner
I see lots of sentences containing the structure of "verbal phrase + prepositional phrase + prepositional phrase" like the example above.
Smoke hung in the air above the city.
I just do not know whether the second prepositional phrase (in this example, above the city) modifies the verb (hung), or if it modifies the noun (the air) in the first prepositional phrase.
On the other hand, that cannot be generalised.
"I walked through the mud in my galoshes" doesn't mean there was mud in my galoshes.
I'm also not sure whether 'above the city' cannot modify 'hung'. The problem is that even if the smoke hung above the city, it has to hang in air. If you change it minimally to "The smoke blew in the air over the city" it becomes less clear.
***** NOT A TEACHER *****
What prepositional phrases modify also drives me crazy.
I was just (only) wondering what you would say about this sentence:
"(Heavy) smoke hung in the air (that was [existed]) above the city."