"At Google" is such a broad category that no single answer suffices. For anyone working on the hot-path of search/ads/knowledge graph back-end, sure, they need to know their algorithms. Same for the language teams like Nystrom is on. For a front-end engineer, which is what I was at Google (exclusively in Dart fwiw)? Probably not. I implemented a graph traversal exactly once.

However, Google uses the same interview process for all software engineers, and mostly decides what job they will do after deciding whether to hire them. So they really can't tailor their questions without changing their entire process. I think they should change it, but I understand why they haven't.