This is my process of identifying the normal forms:

Tables:
customer(name,addr,MEMBERNO)
movie(DESCRIPTION,director,serialno)
borrow(memberno,DATE,SERIALNO)

Determinants:
memberno -> name,addr
description -> director,serialno
serialno,date -> memberno
serialno -> description
serialno -> director
name,addr -> memberno

CKs:
memberno is CK
description is CK
serialno,date is CK
serialno -> description,director (so serialno is CK)
name,addr is CK

For 2NF, non-prime attributes must be dependent on CK:

movie.director: depends on description (is CK) or serialno (is CK)
borrow.memberno: depends on serialno,date (is CK)

It is in 2NF.

For 3NF, non-prime attributes must be directly dependent on CK, not transitively dependent:

movie.director: depends on serialno, then depends on description (is CK)

It is NOT in 3NF.

Relationship is in first normal form. serialno,date is candidate key here and proper subset of candidate key is belongs to non prime attribute that is sno-> description,dir. please verify it.

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Answer is 2

This breaks 3NF

description->director,serialno serialno->description serialno->director