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@ Katie

The likely cause of this is that the PHP GD image library was not installed on your web host account. This is a standard library that is loaded on nearly all hosts, I would contact your web host support team and request that they install this library. This is actually required by WP too. Though that requirement is silent. WP, instead of creating the thumbs and other images sizes that may be required will simply serve the fullsized large image which slows down your site for your users.

Hope this helps, let me know.