I am Working On a Medical Project and the app can able to record the conversation between doctor and patient and send it for Transcription.
Assignment :
YES, you can, just enable "Virtual microphone uses host audio input". Also, the app should ask for permission, you should allow it to use your audio.
Image of How to enable Android emulator audio
To make sure that the problem is not your app, you can go to google chrome in the emulator and use this web app -> https://online-voice-recorder.com/ just to make sure that the audio recording is working.