To answer this question, one must dive into the great mystery that surrounds Jay Gatsby. This mystery, in my estimation, is what makes him a great character of classic literature that has stood the test of time.

Jay Gatsby himself answers the question in chapter 4 of F. Scott Fitzgerald's novel. This is the chapter in which Gatsby is trying to gain Nick Carraway's approval because he needs Nick's help to woo Daisy. He tells Nick a rather fantastic tale about himself, and it is difficult for Nick to believe him. But just as the doubts seem greatest, Gatsby produces proof.

"Then came the war, old sport. It was a great relief and I tried very hard to die but I seemed to bear an enchanted life. I accepted a commission as first lieutenant when it began. In the Argonne Forest I took two machine-gun detachments so far forward that there was a half mile gap on either side of us where the infantry couldn’t advance. We stayed there two days and two nights, a hundred and thirty men with sixteen Lewis guns, and when the infantry came up at last they found the insignia of three German divisions among the piles of dead. I was promoted to be a major and every Allied government gave me a decoration—even Montenegro, little Montenegro down on the Adriatic Sea!" Little Montenegro! He lifted up the words and nodded at them—with his smile. The smile comprehended Montenegro’s troubled history and sympathized with the brave struggles of the Montenegrin people. It appreciated fully the chain of national circumstances which had elicited this tribute from Montenegro’s warm little heart. My incredulity was submerged in fascination now; it was like skimming hastily through a dozen magazines. He reached in his pocket and a piece of metal, slung on a ribbon, fell into my palm. "That’s the one from Montenegro." To my astonishment, the thing had an authentic look. Orderi di Danilo, ran the circular legend, Montenegro, Nicolas Rex. "Turn it." Major Jay Gatsby, I read, For Valour Extraordinary.

Producing the engraved medal from Montenegro gives Gatsby's story an air of authenticity. In the next lines of the novel, he produces a picture of himself at Oxford, giving the story that he was educated there some plausibility as well. Later in the novel, when Tom confronts Gatsby about his relationship with Daisy, the truth about Oxford comes out. He was only there for five months. It was an opportunity given to officers after the war.

So Gatsby exaggerates the truth, but there is still a kernel of truth in what he says. It is possible this is the case with his Montenegro medal, as well. Although it is interesting to note that in 1914, Montenegro was a small, independent kingdom. Montenegro entered the Great War when Austria declared war on Montenegro's neighbor Serbia. They were defeated in 1916 and surrendered. A few Montenegrin soldiers went on to fight with the allies in 1918, but it was a small contingent. It is, therefore, possible but not plausible that Gatsby would have been awarded a medal from this small country. Gatsby is a multilayered character and one who operates outside the boundaries most people live within.