Breakdown of Er barnið inni? Nei, það er ekki inni.
vera
to be
nei
no
það
it / there (existential) / the one (n)
barnið
the child
Questions & Answers about Er barnið inni? Nei, það er ekki inni.
Where exactly does ekki go in the second sentence?
In a simple statement like það er ekki inni, the negative word ekki comes directly after the verb (er). This is the standard rule for basic negation in Icelandic main clauses.
Why do we use það in the answer instead of a word for he or she?
In Icelandic, pronouns always match the grammatical gender of the noun they are replacing. Because barn (child) is a neuter word, we must use the neuter pronoun það (it) to refer to the child, regardless of whether the actual child is a boy or a girl.
How does the word barnið mean "the child"?
Instead of using a separate word for "the", Icelandic attaches it to the end of the noun. The base word is barn (child). Because it is a neuter noun, we add the neuter ending -ið to make it barnið (the child).
Could I use inn instead of inni here?
No, because inni describes being in a fixed location (inside), which fits perfectly with the verb er (is). You would only use inn if there was movement or direction involved, such as walking inside.