Yes. If the drive has enough space. I don't think an encyclopedia requires too much space. The "Britannica Ultimate Reference Suite 2009" requires only 3386 MB (3.3 GB) of free space.
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Yes, a hard drive can store an encyclopedia. The amount of storage space required will depend on the size of the encyclopedia, but with the large storage capacities of modern hard drives, it is typically possible to store an entire encyclopedia on a single drive.