Step 1: Understanding the concept.
An AC generator works on the principle of electromagnetic induction, where a conductor moving in a magnetic field induces an electromotive force (emf) in the conductor, generating an alternating current.
Step 2: Analyzing the statement.
The statement is True, as the working of an AC generator is based on Faraday's law of electromagnetic induction.
Step 3: Conclusion.
The correct answer is True, as an AC generator relies on electromagnetic induction to produce alternating current.