Do you hallucinate as a kid?

At that age, it's called "imagination"

Kids definitely do this. They fill in blanks/context with assumptions, resulting in all sorts of silly responses, for topics of sparse knowledge/certainty. They're not lying, because they think it's true. Sometimes the gap filling is wrong, but usually downright brilliant, within the context of their knowledge.

All kids confidently state incorrect things it's part of growing up

My friend's son says he sometimes closes his eyes, imagines cartoons, and watches them.