Posted by rfvv on Tuesday, November 3, 2009 at 5:20am.
1. It's an adjective phrase (adjectival prepositional phrase) modifying "people," yes.
2. The Matrix is correct. Since it's a movie title, you need to put it in italics or underline those two words. Poems, short stories, and such have quotation marks around them, but book titles, movie titles, titles of artwork, and others need to be italicized or underlined.
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