That's funny, because when I run the program for N=2, I get:

term[0] = a[0][0] a[1][0] a[2][0]
term[1] = a[0][0] a[1][0] a[2][1]
term[2] = a[0][0] a[1][1] a[2][0]
term[3] = a[0][0] a[1][1] a[2][1]
term[4] = a[0][1] a[1][0] a[2][0]
term[5] = a[0][1] a[1][0] a[2][1]
term[6] = a[0][1] a[1][1] a[2][0]
term[7] = a[0][1] a[1][1] a[2][1]
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So perhaps I have an off-by-one error, but certainly I'm generating 2^N terms.