Do you have green yarn?
It is very cold today, so I am wearing the wool sweater that my friend knitted for me.
"Unwind a ball of yarn please. Please. Please!" the ghost asked me over and over again.
When you have fur string (aka string made of fur) what do you think of? Hopefully wool yarn.
The readings for these kanji are the kun'yomi readings. With 毛 you should have learned this reading via the vocab word in the previous level. With 糸 it's actually the main reading for the kanji, so you should already know it.