Because Layer 2 is active, you should see a dotted line around the painteddesert2 image, with small squares called "handles" on the sides and corners.
Move your cursor to the lower left corner handle, and you'll see it change to a diagonal, double-pointing arrow. Hold the shift key on your keyboard down, then click with your mouse on that corner handle, and drag it up and to the right to make the photo smaller on the page. Size the photo until it looks like it's about half the width of the page, then release the mouse button and the shift key.
Note: The reason we held the shift key down, was to constrain the proportions of the photo to the same proportions as the original. Without the shift key held down, you would be able to distort the proportions of the photo.Double click inside the bounding box to apply the transformation.