Use the Marquee Tool to cut out a shape in Photoshop Elements
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To cut a shape from your paper
Select the paper you want to cut with the move tool
Select the Rectangular or Elliptical Marquee tool
Create a selection
Go to Layer - New... Create Layer via Copy (Ctrl+J or Cmd+J on a Mac) to create a new layer from your selection
Hide the original layer by clicking on the eye icon