The set-up follows the definitions in
Hrbacek, Karel; Jech, Thomas, Introduction to set theory, Pure and Applied Mathematics, Marcel Dekker 220. New York, NY: Marcel Dekker (ISBN 0-8247-7915-0/hbk). ix, 291 p. (1999). ZBL1045.03521..
On p. 41: The set of natural numbers is the set
$$\{x:x\in I\text{ for every inductive set I}\}.$$
Claim:
Every natural number $n$ is the set of all smaller natural numbers, i.e.,
$$n=\{m\in\mathbb{N}:m<n\}=\{0,1,\ldots,n-1\}.$$
Indeed, the claim is true for $n=0$ because $0$ is defined to be $\emptyset$. Assume the claim is true for $n$. Then,
$$n+1=n\cup\{n\}=\{m\in\mathbb{N}:m<n\}\cup\{n\}=\{m\in\mathbb{N}:m<n+1\}.$$
The Induction Principle now asserts the truth of the claim for all $n\in\mathbb{N}$.
On p.65: Sets $A$ and $B$ are equipotent (have the same cardinality) if there is a bijective function $f:A\to B$. We denote this by $|A|=|B|$.
On p.69: A set $A$ is finite if it is equipotent to some natural number $n\in\mathbb{N}$. We then define $|A|=n$ and say that $A$ has $n$ elements.
On p.70 the authors use a version of the Recursion Theorem (Exercise 3.5, p.52 in the book) to prove what is asked by the OP, I offer a different proof:
If $A$ is a finite set and $B\subseteq A$, then $B$ is finite.
Answer to the question:
Since $A$ is finite, there is a bijection $f:A\to n$ for some $n\in\mathbb{N}$. Then $B$ and $f[B]$ are equipotent, and $f[B]\subseteq n$. If $f[B]=n$, we are done. Otherwise $f[B]$ is a proper subset of $n$, and using the claim above, it suffices to show that
every proper subset $X$ of a natural number $n$ is equipotent to some member of $\{0,1\ldots,n-1\}$.
Indeed, consider the property $\mathbf{P}(x)$: "any proper subset of $x$ is equipotent to a member of $\{0,1,\ldots,x-1\}$.
Clearly, $\mathbf{P}(0)$ holds trivially.
Assume that every proper subset of $n$ is equipotent to a member of $\{0,1,\ldots,n-1\}$. We have to show that any proper subset of $n+1$ is equipotent to a member of $\{0,1,\ldots,n\}$. Let $X$ be a proper subset of $n+1$; we have the following possibilities:
- If $n\not\in X$, then $X$ is a proper subset of $n$ and the induction hypothesis tells us that $X$ is equipotent to some $m\in n$. Therefore, $m\in n+1$.
- if $n\in X$ we have two possibilities: If $X=n$ then $X$ is equipotent to $n\in n+1$. Otherwise, $X=Y\cup\{n\}$ where $Y$ is a nonempty proper subset of $n$. The induction hypothesis tells us that $Y$ is equipotent to some $m\in n$. Let $g:Y\to m$ be a bijection. Then $\{g,\{(n,m)\}\}$ is a compatible system of functions, so that $g\cup\{(n,m)\}$ is an injective function with domain $X$ and range $m+1$. Therefore, $X$ is equipotent to $m+1$, and since $m\in n$, we have $m+1\in n+1$.
We have concluded that $\mathbf{P}(n+1)$ holds for either possibility, so the Induction Principle now completes the proof.