You have to consider the size of your original image in terms of resolution, not necessarily what you see on the screen.
If you create an letter size (8.5"x11") canvas and a resolution of 300 pixels/inch it will come out 2550x3300 pixels.
If you copy an image that is say 500x500 pixels in its original form, when you paste it into your file, it's actually going to look very small, like it shrunk. In fact, it hasn't shrunk, the canvas is just much larger than the original.
You will have to stretch your image across this new, larger canvas. If it becomes too blurred when you do so, the original's resolution is too low and you will probably need to find another of higher resolution.