The easiest way is to just put through a real transaction for a cheap product, such as a test product for 0.01.
There is a sandbox you can use for paypal, but this is the most convoluted way of testing, as you have to set up test accounts with PayPal sandbox. You then need to put your store into Sandbox mode through Modules >> Payment Types >> PayPal >> Transaction Server = Sandbox. Next you need to have open the Sandbox environment in another browser window. And finally, you need to use the paypal sandbox usernames and passwords they create for you.
Be aware though that PayPal HATE you testing with live accounts, and if they see numerous small transactions between the two same accounts, and you keep on cancelling them, they treat it as possible security threat, and close down both accounts until they have checked the recent actions thoroughly.
You'd be fine for testing a couple of times, but if you experience problems, and have to test more than 5 times, investigate the Sandbox option is my advice!
Absolute