"There is a small bag in my bag."

Translation: هُناك شَنْطة صَغيرة في شَنْطَتي.

[Mi_amas_Noha]

هناك حقيبةٌ صغيرةٌ في حقيبتي

[Crossmount]

thank you for that

[Abdullah_Al-Araj]

هناكcan mean there as in “over there” if you wanted to say there is you would say “في"

[tsuj1g1r1]

That's dialect, not MSA.

[Sumayyavk]

في شنطتي شنطة صغيرة is this can be the answer

[Djibril487949]

I think so yes (but this construction isn't introduced until a later lesson).