By depressing the shift key while creating a new selection you can merge several selections into one complex object and all graphics operations will occur only within the bounds of the selection.

•  Select the SELECTION tool from the tool palette.
• From the control palette select
  (Selection Type circle).
• Create a circular selection.

•  From the control palette select
  (Selection Type rectangle).
• Hold the SHIFT key down & create a rectangular selection overlaying the circular selection.

• Release the shift key & the right mouse button at the same time. You should see something like this.

•  Select the FILL tool from the tool palette.
•  From the control palette select
  (Type solid color,, Tolerance 0, Opacity 100).
• Select a foreground color & fill the selection.

• Select IMAGE > EFFECTS > CUTOUT
  (Shadow Color white, Opacity 61, Blur 4, Vertical Offset 4, Horizontal Offset 4).

• Select IMAGE > EFFECTS > CUTOUT
  (Shadow Color black, Opacity 61, Blur 4, Vertical Offset -4, Horizontal Offset -4)