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In this video tutorial, viewers learn how to properly set up business letters in Microsoft Word. The first step is to adjust the top margin from 1 inch to 2 inches by navigating to Page Layout, selecting Margins, and then clicking on Custom Margins to make the adjustment. After typing "2" in the top margin field and pressing OK, the cursor moves down, reflecting the new margin. The tutorial then proceeds to cover additional changes, including font style, size, and spacing options, preparing the document for effective formatting of the business letter before typing begins.