I imagine these are two different questions so I will answer them separately.
1. Initiative vs. Guilt is the third stage in Erik Erikson's theory of psychosocial development, which typically occurs in children between the ages of 3 and 5. In this stage, children begin to develop a sense of independence and responsibility by exploring their environment and learning how to interact with others. Successfully resolving this conflict leads to the development of initiative, while failure can result in feelings of guilt.
2. The event in the prompt—your parents encouraging you to become friends with other children in the neighborhood—provides an opportunity for the child to overcome this conflict by fostering social skills and independence.