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In this video tutorial, we learn how to properly set up business letters in Microsoft Word. The first step involves adjusting the document's top margin from 1 inch to 2 inches. To do this, go to the "Page Layout" tab, click on "Margins," and select "Custom Margins" at the bottom. Change the top margin to 2 inches by typing the value in directly and pressing OK. After this adjustment, the cursor will shift down to accommodate the new margin. The tutorial then proceeds to discuss changing the font style, size, and spacing options before making any other modifications.