How to make interactive objects in microsoft word?

How is that (displaying a drop down list) even possible?

Those drop down lists in your example are elements of a form:

To create a form in Word that others can fill out, start with a template or document and add content controls. Content controls include things like check boxes, text boxes, date pickers, and drop-down lists. If you’re familiar with databases, these content controls can even be linked to data.

Source: Create forms that users complete or print in Word – Office Support

Posting full instructions would take too much space for an answer, but you can find full tutorials at:

These links should get you started.