Line spacing is a great deal like column width, kerning, or tracking in that the goal is to allow the reader to move fluidly from one line to the next. Or to create enough visual separation so the reader mentally separates pieces of text and compartmentalizes them subconsciously.
It's not impossible that one goal would be to actually slow the reader down a bit and make them use a bit more effort to read. This can often be seen in more "art" style posters and one-offs though, not in books or white papers.
For books or large amounts of text, the goal is most often a smooth, fluid, uninterrupted read without any design "hiccups" that force the reader to stop and find their place again. The reader should be able to reach the end of one line that immediately be able to jump to the start of the next line. Reading is rhythmic -- word, word, word, word, word, line, word, word, word, word, word, line. etc.
There's no hard and fast rule about what is a correct line height for any given typeface. And every typeface may benefit from line spacing adjustments given the type size, audience, and intention.
Most (Adobe) software, by default, sets the line spacing at 120% of the type size. I have no real clue what Word's 1, 1.5, 2, etc, actually measure at. I don't use Word for much actual work.
For large areas of text, I tend to adjust it to minimum of 140% as a default. But that's merely my preference. I will then, at times, adjust further if I feel the rhythm is being rushed, or it's not smooth. This is far more of an aesthetic feeling than practical absolute. The more line spacing you can provide large "walls" of text, the less overwhelming it will seem to the reader at a glance.
In the end, any line spacing is fine if it works - whether it's 300% or 100% doesn't matter as long as there's a smooth rhythm to the reading. What does and does not work can only be determined by solving that rhythmic problem in a given design project with given text and a goal in mind.
Type size, line spacing, column width, color, typeface, all lead to how readable a piece is and how a readers eye "tracks" across a design. Line spacing is just one aspect to consider when designing a piece. There's really no way I'm aware of to give exact values based on a chosen typeface.
I would point out that in your sample, I don't find the line spacing bad. What I find essentially unforgivable is the fact that the line spacing is equal to the paragraph spacing and there's no first line indentation for paragraphs. There's absolutely no indication, looking at the left side of the text, of when a new paragraph starts. If using a larger line spacing, paragraphs should have a larger space between them that is greater than the line spacing, in addition to first line indentation. These two simple adjustments would make reading that sample a great deal easier.