Apa kabar literally asks “what news”. It is the standard greeting question, and unlike the English “how are you”, it expects an actual answer.
Asking
Apa kabar? on its own is fine. Add the person’s title to make it warmer.
Apa kabar, Pak? ‘How are you, sir?’
Apa kabar, Bu? ‘How are you, ma’am?’
The three answers
Baik ‘good’ is the default, and doubling it softens the tone: baik-baik saja is closer to “all fine here”.
Kabar baik ‘good news’ answers the question in its own terms and sounds a little warmer.
Biasa saja ‘just ordinary’ is the honest middle. It is not negative, and Indonesians use it freely, where an English speaker might feel obliged to say “great”.
Returning the question
Add dan kamu? or, more commonly in speech, just kamu? with a rising tone.
Baik. Kamu? ‘Fine. You?’
What you’ll actually hear
Between friends the whole exchange compresses.
What the book says: Apa kabar? → Kabar baik, terima kasih. What you’ll hear: Gimana? → Baik.
Gimana is the everyday form of bagaimana ‘how’. You will hear it constantly, and it is not in most beginner books.