Full Translation: the dog that’s passing by would laugh
She knows it because it’s something commonly said amongst a group of friends very comfortable with each other.
This is something she learned from her fellow college students and the alumni. It plays into the playful nature of Koreans who find a lot of enjoyment and opportunities to bond by making fun of each other.
It is usually said after somebody says something absolutely ridiculous, so ridiculous that even the dog passing by who hears a lot of ridiculous things every day would find it to be ridiculous.
I think it’s really interesting how there’s a culture built around the idea of banter and jokes in Korea, especially as a product of the aftermath of the Korean war. Older folks from an old Korean church I used to attend would always talk about how citizens today work harder on being happy and positive especially after the terrible event of the Korean War, even if it requires them jokingly insulting each other in order to find that happy mood.