Thank you Thank you Thank you so so very much!!
You have no idea how frustrating this issue was, and I had no idea of what's causing that until I saw your comment.
I am using mac air m2 and there was a point when I thought that it could be a hardware issue, and I even consider selling my brand-new machine.
I tried reboot restart reinstallation of office suite even completely format my mac from recovery partition, but no solution worked!!
Thank God!! the downgrade to version 16.86 worked wonders. Now all my word files are working smoothly and there is no beech ball or hang issue as it was there in 16.87 version. The issue was so severe that my mac literally hanged for 3-4 by simple typing in a word file, it was damn irritating.
Shame on Microsoft for shipping such a **** version to the public.