The exam type Free form exam allows you to write questions directly in the text editor or paste text from elsewhere, eg. a Word document.

When using this exam type students as default are given a separate writing area in which the content can be pre-defined beforehand by the teacher.

Under Resources, you can upload additional PDF files

Create a free form based exam

Choose "Upload or create a document" in the first step in the exam creator. 

In step 2, choose "Write or paste in exam questions", and start creating your exam.

 
Once you've created your exam, you can preview it and move on to step 3.

The third step is where you add your exam configurations. More information about the available exam configurations can be found in the guide for creating exams here