Yes, if the sensor is truly a 1600x1200 (two megapixel) device and the camera is artificially generating 5 megapixel images, then yes, one could say "extrapolated" — or, dishonest, pointless scammery, since this doesn't provide you with any real advantages.

To be pedantic, we wouldn't say that the sensor is extrapolated. We would say that the 5mpix image is extrapolated from the actual data from the smaller sensor.

It's more correct to say interpolated rather than extrapolated — and indeed you will often find this term buried in specifications or in reviews. That's because the made-up data is constructed from the surrounding points, rather than being projected outside of it. But at this scale, it doesn't really matter, since it's so far from the range where added values are providing any actual useful information.

I hope that by now you won't see this on any but the very cheapest knockoff phones, because genuine reasonable-quality 5mpix and 8mpix parts are readily available at very low cost. But, with a quick search, I found an example, in a $100 unlocked 3G phone — although they're at least honest enough to list the real number first, rather than in the fine print.