The paragraph Style you're using evidently as a 'space before' and/or 'space after' setting other than 0. Setting both to 0 will reduce the inter-paragraph spacing to 0. You should do this by modifying the relevant paragraphs Style definitions. See:
http://www.uwec.edu/help//Word03/sty-bscs-m.htm
http://www.uwec.edu/help/Word03/sty-opt-m.htm

http://www.uwec.edu/help/Word03/word03.htm

__________________
Cheers,
Paul Edstein
[Fmr MS MVP - Word]