# Monetary Transmission in New Keynesian - Euler Equation

I get that NK model basically consists of the three equations: Taylor rule, Dynamic IS curve and the NK Phillips curve.

I want to know the effect of nominal interest rate reduction on the transmission channels.

My lecturer says ''nominal rate goes down, real rate therefore rises, raising actual output relative to potential through the euler equation. this then feeds into the philips curve and raises actual inflation.''

Q: How does the real rate rise when nominal rate goes down? And what is the Euler Equation here?