Assume that you would like it to be done in a macro environment.  Here is a function like macro.

%let a=x y;
%let b=1 2;

%macro expmvar(a, b);
%let i=1;

%do %until(%scan(&a,&i)=%str( ));

        %let j=1;
        %do %until(%scan(&b,&j)=%str( ));
                %scan(&a,&i)%scan(&b,&j)
                %let j=%eval(&j+1);
         %end;   
        %let i=%eval(&i+1);

%end;
%mend;

%let newvar=%expmvar(&a, &b);
%put >>>&newvar<<<;

%put >>>%expmvar(x y z, 1 2 7 5)<<<;