You are reading it line by line, and setting the country variable to whatever line you have. You should put it in an array, or an ArrayList, then compare the contents of the file, with the input. Something like this:
BufferedReader rd = new BufferedReader(new FileReader("test.txt"));
String country;
ArrayList<String> file = new ArrayList<String>();
while ((country = rd.readLine()) != null) {
file.add(country);
}
for (String s : file) {
if (s.equals(keyboard.nextLine())) {
System.out.println("i know of this contry");
}else {
System.out.println("I dont know thic contry");
}
}