Can that also be used in the sense of "not dangerous", e.g. "De hond doet niets"?
That sentence doesn't work in Dutch, you need an object, e.g. We doen het niet.
It doesn't matter, but you obviously have to pick one. We is more common than wij. But if the word is stressed, wij is the only option.
In translations, normally both should be accepted. In dictation exercises only the one that is actually spoken. Theoretically. In practice the fast voice pronounces both as we, and you must check with the slow voice.
Where does the anything come from? My answer was we do nothing and it was wrong
The problem has nothing to do with Dutch. "We do nothing" would be a correct translation if it were the normal way to put this in English, but it isn't. If it is used at all, it carries a special emphasis that is not at all implied by the Dutch sentence, though of course nobody prevents you from stressing niets a lot.
Personally I think it should be accepted, but it also makes some sense to reject it.
Wasn't anything iets? So we are not doint anything wouldnt be " Wij doen niets iets"?
No. Iets means something. Make sure not to confuse niets (nothing, not anything) with niet (not). You can think of niets as the contraction of niet iets.
I thought about it 2 minutes after that exercise but couldn't return to delete my comment. Thank you for clarifying!
No, because the Dutch sentence is the normal idiomatic way of saying this in Dutch, whereas the literal translation "we are doing nothing" is considered unidiomatic (or reserved for special situations) by quite a few native English speakers nowadays.
Niets just means nothing and is not a plural. It just happens to end with an s.
No. Although OK, that's just not the most idiomatic way to say it in English. (Don't ask me why. I guess in all other Germanic languages it is.)